Pricing default swaps: empirical evidence

In this paper we compare market prices of credit default swaps with model prices. We show that a simple reduced form model with a constant recovery rate outperforms the market practice of directly comparing bonds' credit spreads to default swap premiums. We find that the model works well for investment grade credit default swaps, but only if we use swap or repo rates as proxy for default-free interest rates. This indicates that the government curve is no longer seen as the reference default-free curve. We also show that the model is insensitive to the value of the assumed recovery ratecredit default swaps;credit risk;default risk;recovery rates;reduced form models

An Empirical Comparison of Default Swap Pricing Models

Abstract: In this paper we compare market prices of credit default swaps with model prices. We show that a simple reduced form model with a constant recovery rate outperforms the market practice of directly comparing bonds' credit spreads to default swap premiums. We find that the model works well for investment grade credit default swaps, but only if we use swap or repo rates as proxy for default-free interest rates. This indicates that the government curve is no longer seen as the reference default-free curve. We also show that the model is insensitive to the value of the assumed recovery rate. Keywords: credit default swaps, credit derivatives, credit risk, default risk, default-free interest ratescredit default swaps;credit risk;default risk;market prices;credit derivatives;default-free interest rates;empirical models

Comparing possible proxies of corporate bond liquidity

We consider eight different proxies (issued amount, coupon, listed, age, missing prices, yield volatility, number of contributors and yield dispersion) to measure corporate bond liquidity and use a five-variable model to control for interest rate risk, credit risk, maturity, rating and currency differences between bonds. The null hypothesis that liquidity risk is not priced in our data set of euro corporate bonds is rejected for seven out of eight liquidity proxies. We find significant liquidity premia, ranging from 9 to 24 basis points. A comparison test between liquidity proxies shows limited differences between the proxies.euro market;corporate bonds;liquidity;Fama-French model

An Empirical Comparison of Default Swap Pricing Models

Abstract: In this paper we compare market prices of credit default swaps with model prices. We show that a simple reduced form model with a constant recovery rate outperforms the market practice of directly comparing bonds' credit spreads to default swap premiums. We find that the model works well for investment grade credit default swaps, but only if we use swap or repo rates as proxy for default-free interest rates. This indicates that the government curve is no longer seen as the reference default-free curve. We also show that the model is insensitive to the value of the assumed recovery rate. Keywords: credit default swaps, credit derivatives, credit risk, default risk, default-free interest rate

Pricing default swaps: empirical evidence

In this paper we compare market prices of credit default swaps with model prices. We show that a simple reduced form model with a constant recovery rate outperforms the market practice of directly comparing bonds' credit spreads to default swap premiums. We find that the model works well for investment grade credit default swaps, but only if we use swap or repo rates as proxy for default-free interest rates. This indicates that the government curve is no longer seen as the reference default-free curve. We also show that the model is insensitive to the value of the assumed recovery rat

Self-consistent simulation of quantum wires defined by local oxidation of Ga[Al]As heterostructures

We calculate the electronic width of quantum wires as a function of their lithographic width in analogy to experiments performed on nanostructures defined by local oxidation of Ga[Al]As heterostructures. Two--dimensional simulations of two parallel oxide lines on top of a Ga[Al]As heterostructure defining a quantum wire are carried out in the framework of Density Functional Theory in the Local Density Approximation and are found to be in agreement with measurements. Quantitative assessment of the influence of various experimental uncertainties is given. The most influential parameter turns out to be the oxide line depth, followed by its exact shape and the effect of background doping (in decreasing order).Comment: 5 pages, 6 figures; revised figures, clarified tex

Comparing possible proxies of corporate bond liquidity

We consider eight different proxies (issued amount, coupon, listed, age, missing prices, yield volatility, number of contributors and yield dispersion) to measure corporate bond liquidity and use a five-variable model to control for interest rate risk, credit risk, maturity, rating and currency differences between bonds. The null hypothesis that liquidity risk is not priced in our data set of euro corporate bonds is rejected for seven out of eight liquidity proxies. We find significant liquidity premia, ranging from 9 to 24 basis points. A comparison test between liquidity proxies shows limited differences between the proxies

Mixtures of tails in clustered automobile collision claims

Knowledge of the tail shape of claim distributions provides important actuarial information. This paper discusses how two techniques commonly used in assessing the most appropriate underlying distribution can be usefully combined. The maximum likelihood approach is theoretically appealing since it is preferable to many other estimators in the sense of best asymptotic normality. Likelihood based tests are, however, not always capable to discriminate among non-nested classes of distributions. Extremal value theory offers an attractive tool to overcome this problem. It shows that a much larger set of distributions is nested in their tails by the so-called tail parameter. This paper shows that both estimation strategies can be usefully combined when the data generating process is characterized by strong clustering in time and size. We find that the extreme value theory is a useful starting point in detecting the appropriate distribution class. Once that has been achieved, the likelihood-based EM-algorithm is proposed to capture the clustering phenomena. Clustering is particularly pervasive in actuarial data. An empirical application to a four-year data set of Dutch automobile collision claims is therefore used to illustrate the approach

PCSK9: A Multi-Faceted Protein That Is Involved in Cardiovascular Biology.

Pro-protein convertase subtilisin/kexin type 9 (PCSK9) is secreted mostly by hepatocytes and to a lesser extent by the intestine, pancreas, kidney, adipose tissue, and vascular cells. PCSK9 has been known to interact with the low-density lipoprotein receptor (LDLR) and chaperones the receptor to its degradation. In this manner, targeting PCSK9 is a novel attractive approach to reduce hyperlipidaemia and the risk for cardiovascular diseases. Recently, it has been recognised that the effects of PCSK9 in relation to cardiovascular complications are not only LDLR related, but that various LDLR-independent pathways and processes are also influenced. In this review, the various LDLR dependent and especially independent effects of PCSK9 on the cardiovascular system are discussed, followed by an overview of related PCSK9-polymorphisms and currently available and future therapeutic approaches to manipulate PCSK9 expression

ILC2-mediated immune crosstalk in chronic (vascular) inflammation

Crosstalk between innate and adaptive immunity is pivotal for an efficient immune response and to maintain immune homeostasis under steady state conditions. As part of the innate immune system, type 2 innate lymphoid cells (ILC2s) have emerged as new important regulators of tissue homeostasis and repair by fine-tuning innate-adaptive immune cell crosstalk. ILC2s mediate either pro- or anti-inflammatory immune responses in a context dependent manner. Inflammation has proven to be a key driver of atherosclerosis, resembling the key underlying pathophysiology of cardiovascular disease (CVD). Notably, numerous studies point towards an atheroprotective role of ILC2s e.g., by mediating secretion of type-II cytokines (IL-5, IL-13, IL-9). Boosting these protective responses may be suitable for promising future therapy, although these protective cues are currently incompletely understood. Additionally, little is known about the mechanisms by which chemokine/chemokine receptor signaling shapes ILC2 functions in vascular inflammation and atherosclerosis. Hence, this review will focus on the latest findings regarding the protective and chemokine/chemokine receptor guided interplay between ILC2s and other immune cells like T and B cells, dendritic cells and macrophages in atherosclerosis. Further, we will elaborate on potential therapeutic implications which result or could be distilled from the dialogue of ILC2s with cells of the immune system in cardiovascular diseases