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- The Quant That Ate New York
- One of the scariest things about the financial meltdown is how evaluating risk has changed dramatically. Federal regulators allowed banks to greatly increase their loan to asset ratios. And all sorts of higher mathematics equations popped up that seemed to justify trading in murky derivatives in ways not considered before....
- Blog posts 2009-02-24
- Is Insurance Exchange a 'Trade Off' for AIG's Credit Default Problem
- Did we really need to pay those American International Group traders $165 million in bonuses to keep them around? The vast majority of Americans say "No." On the other hand, more Americans would know about a wife swap than a credit default swap. AIG Chief Executive Edward...
- Blog posts 2009-03-20
- Credit Default Swaps are the Real Stress in Bank Tests
- Stress tests to be revealed Thursday will likely show that while subprime, corporate and commercial real estate loans are doing their fair share of tearing apart bank balance sheets, the real gremlin in the banking engine is the credit default swap, or CDS. Credit default swaps are...
- Blog posts 2009-05-05
- Why Didn't Regulators See the Current Crisis Coming?
- In his second post, Mark Thoma says that "we did a very poor job of monitoring the buildup of systemic risk that caused the crash." That is certainly true. But another, perhaps even bigger problem, was that the "we" included regulators that did not stop banks from taking huge risks...
- Blog posts 2009-04-15
Additional Resources
- The Relationship Between Credit Default Swap Spreads, Bond Yields, and Credit Rating Announcements
- A company's credit default swap spread is the cost per annum for protection against a default by the company. This paper analyzes data on credit default swap spreads collected by a credit derivatives broker. It then examines the relationship between credit default spreads and bond yields and reach conclusions on...
- White papers 2004-01-01
- The Valuation of Credit Default Swap Options
- This article develops models for valuing credit default swaps and European credit default swap options. The model for valuing European credit default swap options is very similar to the standard market model for valuing European swap options. Once default probabilities and expected recovery rates have been estimated, it enables traders...
- White papers 2002-09-01
- Credit Default Swap Calibration and Equity Swap Valuation Under Counterparty Risk With a Tractable Structural Model
- Modelling firms default is becoming important, especially in recent times where the market is experiencing a large development in credit derivatives trading. This paper develops a tractable structural model with analytical default probabilities depending on some dynamics parameters, and shows how to calibrate the model using a chosen number of...
- White papers 2004-08-24
- The Credit-Default Swap Market: Is Credit Protection Priced Correctly?
- This article examines the pricing of credit protection in the rapidly growing creditdefault swap market using an extensive data set provided by Citigroup. It fit a reduced-form model to corporate bond yields and solves for the credit-default swap premia they imply and compare this implied creditdefault swap premia to actual...
- White papers 2003-08-01
- Credit Default Swap Prices Down but Still Elevated
- Hickey and Walters Bespoke submit: The credit default swap (CDS) became a buzzword during the financial crisis as their prices soared and some firms that wrote them had to be bailed out in part because they would never be able to actually pay them out if default actually...
- External links 2009-08-05
- Creditex and DTCC join credit default swap index bandwagon.
- Byline: Natasha de Teran Creditex, the inter-dealer brokerage and electronic trading platform, and the Depository Trust & Clearing Corporation DTCC, the US clearing organisation, are throwing their weight behind the new credit derivative index markets, launching new electronic ventures to service the products.Creditex...
- Research articles 2004-02-25
- The iBoxx.CDX Consortium Adds U.S. High Yield Credit Default Swap Index
- Business Editors NEW YORK--BUSINESS WIRE--Nov. 13, 2003 Building on the success of its 125-name investment-grade credit default swap index, iBoxx CDX.NA.IG, the iBoxx CDX consortium of eleven leading global dealers today announced the launch of "iBoxx CDX.NA.HY", a 100-name tradable index of credit default swaps ("CDS") on U.S....
- Research articles 2003-11-13
- An Empirical Comparison of Credit Spreads Between the Bond Market and the Credit Default Swap Market
- This paper compares the pricing of credit risk in the bond market and the fast-growing credit default swap CDS market. The empirical findings confirm the theoretical prediction that bond spreads and CDS spreads move together in the long run. Nevertheless, in the short run this relationship does not always hold....
- White papers 2004-08-01
- Explaining Credit Default Swap Spreads With Equity Volatility and Jump Risks of Individual Firms
- A structural model with stochastic volatility and jumps implies particular relationships between observed equity returns and credit spreads. This paper explores such effects in the credit default swap CDS market. It uses a novel approach to identify the realized jumps of individual equity from high frequency data. The empirical results...
- White papers 2005-09-01
- Fitch Survey: Credit Default Swap — CDS — Options: What They Are, Who Is Using Them, and Why
- NEW YORK & LONDON -- Credit swaptions are options to buy or sell CDS on either individual corporate reference entities single names or traded indices. While smaller than the credit default swap market, a new survey from Fitch Ratings has found that the credit 'swaptions' market has grown significantly over...
- Research articles 2005-03-21
- Swiss Re suing XL over derivative deal.(credit default swap agreement)(Brief Article)
- LONDON-A legal dispute between Swiss Re Financial Products Corp. and XL Insurance Ltd. apparently centers on the question of a company's name in a credit default swap agreement. As such, the case is a natural product of the highly customized nature of credit derivative...
- Research articles 2001-06-04
- Overpricing in Emerging Market Credit-Default-Swap Contracts: Some Evidence From Recent Distress Cases
- Since recent debt restructurings that constitute credit events have been more frequent than outright defaults, sovereign bond prices may not collapse during distress. In this case, the likely high recovery values after restructuring suggest that the cost of credit-default-swap CDS contracts to the buyer as measured by CDS spreads may...
- White papers 2005-06-01
- CDS IndexCo and Markit Launch Loan Credit Default Swap Index
- LCDX, a Credit Derivative Index, Allows Investors to Go Long or Short U.S. Leveraged Loans NEW YORK -- CDS IndexCo LLC ("CDS IndexCo"), a consortium of 16 investment banks licensed as market makers in the ABX, CDX and CMBX indices, and Markit Group Limited ("Markit"), the leading provider of...
- Research articles 2007-05-21
- Are Credit Default Swap Spreads High in Emerging Markets? An Alternative Methodology for Proxying Recovery Value
- In times of distress when a country loses access to markets, there is evidence that Credit Default Swap CDS spreads are a leading indicator for sovereign risk than the EMBI+ sub-index for the country. However, it is not easy to discern the variables that determine the level of CDS spreads...
- White papers 2003-12-01
- Fitch Incorporated into iTraxx Credit Default Swap Indices
- LONDON & NEW YORK -- International Index Company, the manager of the iTraxx bond indices, has amended its rules governing the iTraxx Europe and Crossover Credit Default Swap Indices with a view to ensure that they incorporate and reflect changes in the market environment. The rules now include the use...
- Research articles 2005-10-20
- Assured Guaranty Ltd. Announces Reclassification in Conformance with New Industry Accounting Presentation for Credit Default Swap Contracts
- Reclassification Does Not Change Net Income or Shareholders' Equity HAMILTON, Bermuda -- Assured Guaranty Ltd. (NYSE:AGO)("Assured" or the "Company") today announced that effective the quarter ended March 31, 2008, it will reclassify the revenues and expenses under U.S. Generally Accepted Accounting Principles ("US GAAP") associated with financial guaranty contracts...
- Research articles 2008-04-22
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