1,412 research outputs found
Implied correlations of iTraxx tranches during the financial crisis
Implied Base Correlations of Single-tranche CDOs on standardized Credit Indices such as the iTraxx Europe have been used in the credit derivatives market for price communication. During the financial crisis, implied correlations have been quite volatile indicating the growing fraction of systematic credit risk of STCDOs. This paper analyses the determinants of tranche implied base correlations for the period September 2006 until April 2009. It will be shown that realized asset correlations between iTraxx Europe corporates are not able to explain the extreme movements of tranche implied correlations during the financial crisis. Additionally, it will be seen that the worsening creditworthiness of market participants in the interbank market as well as growing pressure on their refinancing conditions correlated significantly with the development of implied base correlations of iTraxx tranches. --Implied Correlation,Asset Correlation,Systematic Credit Risk,Market Liquidity,Funding Liquity
The dynamics of short- and long-term CDS-spreads of banks
This paper studies 'Stylised Facts' and 'Determinants' of short-and long-term CDS-spreads of banks. As short-term spreads we choose 6M-, as long-term spreads we choose 5Y-spreads. In the section 'Stylised Facts' we found that the correlation between short-and long-term spreads for the total period is high (97%). However, the correlation in sub-periods varies across all possible correlations. Particularly, spreads can have negative correlation. In contrast to [Covitz and Downing, 2007], we find high positive (Covitz/Downing: high negative) correlation for turbulent market circumstances. In the section 'Deteminants' we confirm the Merton-factors (stock price, stock price volatility, interest rate level) for the 5Y-segment, but not for the 6M-segment. Furthermore, we do not find any empirical support that short-term spreads are particularly sensitive to illiquidity factors. In that sense, we also contrast [Covitz and Downing, 2007]. --Liquidity,insolvency,banks
Gold in the investment portfolio
The paper examines the key drivers of gold investment. Since 2000 the gold price has risen drastically, making gold an interesting add-on to a portfolio. As gold futures have negative roll returns, gold pool accounts are characterized by high credit risk and physical possession of gold means high transaction costs, Xetra-Gold might be the most efficient way to enter the market. Xetra-Gold is a product created by the Deutsche Börse in 2007, which is handled like a security but can be exchanged into physical gold any time. In the portfolio context gold has had a positive impact on Euro and USD portfolios between 2000 and 2006 due to considerable returns and low correlation to other assets. However, this has not been true for almost all other periods, the correlation was always low but the returns of gold were almost zero, overriding the positive diversification effect. --Investing in gold,gold in the portfolio,correlation of gold,returns of gold,Xetra-Gold
Bewertung von Kreditprodukten und Credit Default Swaps
The Paper shows the evaluation of credit risky products. Default probabilities for brisk adjusted cash flows or risk adjusted discounting are the backbones for the evaluation of bonds and credits. The second approach is using the market value of shares and their implied volatility to calculate the asset value of the firm and the indirect probability of default. The last part gives the arbitrage arguments for pricing credit default swaps. --
Kreditrisiko (CreditMetrics)
WĂ€hrend die Markpreisrisiken (Zinsen, Aktien und WĂ€hrungen) mit Hilfe des RiskMetrics-Ansatzes gut beschrieben werden können und dafĂŒr relativ ĂŒberzeugende Derivate zur Absicherung unerwĂŒnschter Risiken zur VerfĂŒgung stehen, hat diese Entwicklung im Kreditbereich erst begonnen. Bei der Bewertung von AusfĂ€llen konkurrieren einerseits optionstheoretische AnsĂ€tze mit der Möglichkeit, historische Ausfallwahrscheinlichkeiten fĂŒr die Bewertung von Kreditrisiken zu benutzen. Dieser Ansatz fĂŒr eine Kreditportfoliobewertung als Grundkonzept des Vorschlags CreditMetrics (JPMorgan) wird im folgenden vorgestellt. Die verwendeten DatensĂ€tze sind exemplarisch zu verstehen. --Adressenrisiko,Ausfallrisiko,BonitĂ€tsklasse,CreditMetrics,historische Ausfallwahrscheinlichkeiten,Korrelation,Kreditportfolio,kumulierte Ausfallwahrscheinlichkeiten,Value at Risk
Kreditderivate
In den letzten Jahren hat eine intensive Entwicklung von Kreditderivaten begonnen.Im Kern soll hiermit die Möglichkeit geschaffen werden, das Adressenrisiko einer Transaktion von ihrem Marktrisiko zu separieren und es damit einzeln handelbar, aber insbesondere auch hedgebar zu machen. Die ersten AnsĂ€tze zum Auslagern von Ausfallrisiken stammen von amerikanischen Investmentbanken, die aufgrund ihres begrenzten Eigenkapitals versuchten, die Ausfallrisiken auf Dritte zu ĂŒbertragen. Der Gedanke wurde schnell aufgenommen, denn Kreditderivate bieten eine Anzahl zusĂ€tzlicher Möglichkeiten. Bei vielen Banken (z.B. bei Sparkassen aufgrund des Regionalprinzips) weist das Kreditportfolio eine schlechte Diversifikation in bezug auf Regional- und Branchenrisiken aus. Der direkte Handel mit Krediten erweist sich oft als zu umstĂ€ndlich, und den Möglichkeiten der Verbriefung (asset backed) sind auch enge Grenzen gesetzt. Ein tiefer Markt in Derivaten ermöglicht hier, Risiken aus dem Portfolio indirekt zu verkaufen, aber auch durch Beimischung schwach korrelierter Regionen und Branchen die Effizienz des Portfolios zu erhöhen. Manchen HĂ€usern sind Kredite erster BonitĂ€t (AAA und AA) nur begrenzt zugĂ€nglich. Auch sie können mit Hilfe geeigneter Derivate die Portfoliostruktur verbessern. Auf der anderen Seite können jetzt andere Gruppen Risiken aus KreditgeschĂ€ften ĂŒbernehmen und so ihre Portfolios effizienter gestalten. Ein weiterer wesentlicher Punkt ist die Möglichkeit, Kreditrisiken nun mit Zwei-Wege-Preisen (Geld/Brief) zu handeln. Dies ermöglicht einen deutlich effizienteren Handel und mittelfrisitig eine transparentere Preisbildung. Im folgenden werden zunĂ€chst Kreditderivate vorgestellt, anschlieĂend Anwendungsmöglichkeiten diskutiert und schlieĂlich AnsĂ€tze zur Preisbildung besprochen. --Adressenrisiko,Ausfallrisiko,BonitĂ€tsrisiko,Credit Default Swap,Credit Event,Credit Linked Note,Credit Spread Put,Kreditportfolio,Kreditrisiko,Total Rate of Return Swap
The value-added of investable hedge fund indices
This paper empirically investigates the risk and performance of three types of alternative beta products over the January 2002 to September 2009 time period: funds of hedge funds (FHFs), investable hedge fund indices (IHFIs), and hedge fund replication strategies (HFRS). We show that IHFIs are true alternative beta products with high correlations and beta to noninvestable hedge fund indices. Our results further suggest that, in a best case scenario, IHFIs outperform FHFs and HFRS on a risk-adjusted basis. However, in the worst case scenario, IHFIs underperform both investments. If we take the average of all IHFIs, we find they perform equally well as FHFs. Hence, IHFIs constitute a solid alternative to FHF investments, while costing substantially less, and offering generally more transparency and liquidity. We propose that fee-sensitive investors especially should consider taking a core-satellite approach to their hedge fund portfolio, with the core represented by cheap passive hedge fund beta through IHFIs, and the satellite represented by more expensive and actively managed alphagenerating FHFs. --Hedge funds,investable hedge fund indices,alternative beta,funds of hedge funds,hedge fund replication,Omega ratio
Eine empirische Analyse der Spreadunterschiede von Festsatzanleihen zu Floatern im Euroraum und deren Zusammenhang zum Preis eines Credit Default Swaps
The paper analyses the factors influencing the credit spread of denominated bonds and credit default swaps. The regression shows a significant difference of the credit spread of corporate floaters compared to straight bonds. The steepnes of the yield curve leads surprisingly to lower credit spreads. This is also true for a higher risk free rate. The liquidity effect matters for straight bonds but is unimportant for floaters. The rating has a significant influence, but can only partially explain the spread. It can be shown that the same factors influence the spread of a credit default swap. As predicted by theory the floater spread has an almost linear relationship to the CDS Spread, but it can only explain 50% of its movement, because transaction prices and different liquidity play a substantial role in pricing these products. --Credit Spread,Risikoaufschlag von Anleihen,Fix-Float Spread,Bewertung von CDS,Pricing of Credit Default Swaps
Determinanten europÀischer CMBS spreads: ein empirisches Modell zur Bestimmung der RisikoaufschlÀge von commercial mortgage-backed securities (CMBS)
This paper tracks a structured financial innovation, the commercial mortgage-backed security which is not as novel as current discussion around the sub-prime crisis let assume. However, CMBS as credit-derivatives feature various factors that influence the risks arising from a commercial-mortgage credit agreement as well as marked-risks influenced by economy and marked behaviour. Risks of CMBS are generally evaluated by rating agencies, but volatile market prices show, that investors have different views of risks arising from commercial mortgage-backed securities. Within this paper six determinants are presented that have significant influence on the CMBS spread. The results show that prepayment risks do not seem to have any influence on CMBS pricing, however the economical situation as well as credit enhancement is of high importance. This also shows that enhancement is only one variable that counts for investors as they obviously have a sophisticated view. The defined determinants provide the basis to a linear regression-equation that allows an estimation on CMBS prices. --CMBS Spread,Commercial Mortgage-Backed Securities
Niederschlagsderivate
Some traders estimate precipitation derivatives to have a potential which increases even that of temperature derivatives. Precipitation derivatives can be used both for hedging and marketing purposes for a diverse number of possible end users. However, the complex way of measuring precipitation, the lack of qualitative data and the feature of precipitation as being locally and timely variable make it necessary to develop highly individual contracts to keep the basis risk low. --Precipitation derivatives,weather derivatives,weather risk management,hedging,base risk,liquidity,precipitation variability
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