A bond swap is a technique whereby an investor chooses to sell a bond and simultaneously purchase another bond with the proceeds from the sale. Fixed-income securities make excellent candidates for swapping because it is often easy to find two bonds with similar features in terms of credit quality, coupon,...
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...
Before you haul all your depreciated bonds off to a swap meet with your broker, be sure to account for the cost of replacing each bond you sell. This financial calculator will show you how. The spread between the price dealers pay for a bond and the price at which...
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...
A quality swap is a type of swap where you are looking to move from a bond with a lower credit quality rating to one with a higher credit rating or vice versa. The credit rating is generally a reflection of an issuer's financial health. It is one of the...
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....
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...
Chile, Nov 25, 2004 (Estrategia/SABI via COMTEX) AES Gener, the Chilean electricity generation company which is owned by AES, the US energy group, yesterday said that SEC, the US Securities and Exchange Commission, has authorized the company to launch a US$400mil senior bond issue...
John Jansen submits: Prices of Treasury securities registered bifurcated results in the overnight trading session. Those results indicate a significant reduction in the fear factor as the yield curve has shifted significantly in the process.The yield on the 2 year note has jumped by 18 basis points to 1.72...
Calafia Beach Pundit submits: I've been writing for months about how the decline in swap spreads was a leading indicator of improvement in other areas of the market. Lower swap spreads are a good indicator that liquidity and confidence are returning to the fixed-income market, and this is...
NEW YORK -- Fitch Ratings published a study that tracked GM and GMAC credit default swap CDS and bond trading between July 2004 and January 2005, focusing on the number of trades executed.
This paper argues that liquidity differences between government securities and short-term Eurodollar borrowings account for interest rate swap spreads. It then models the convenience of liquidity as a linear function of two mean-reverting state variables and values it. The interest rate swap spread for a swap of particular maturity is...
Bond investors are beating the market this year, but investors in bond mutual funds can't count on taking those profits to the bank. Bond funds have a quirk: They never mature. When a bond comes of age, you get your money back. Bond funds, on the other hand, are eternal...
This paper examines equilibrium price relationships and price discovery between credit default swap CDS, bond, and equity markets for emerging market sovereign issuers. The findings suggest that CDS and bond spreads converge despite various pressures that arise in the market. In most countries, however, the paper does not find any...
Delighted by Wife Swap's performance so far in its debut season, ABC is prepping two special episodes. The first, airing Dec. 1, is a self-explanatory one-off: Wife Swap: The Husband Edition. But the other, yet-to-be-scheduled variation, Boss Swap, will function as a back-door pilot that may...
Dealers at commercial banks do most of the market making that is done in the interest rate swap and currency swap markets. In addition to making markets to their customers, these traders will also make prices to other financial institutions in the wholesale or interbank market, often in transactions facilitated...
This paper investigates the pricing of Japanese yen interest rate swaps during the period 1990-96. The paper obtain measures of the spreads of the swap rates over comparable Japanese Government Bonds JGBs for different maturities and analyze the relationship between the swap spreads and credit risk variables. Our empirical results...
On Wife Swap each week, two moms trade places, merrily heading off to a new town with new kids and a new husband. And each week, at some point in the ABC reality show experience, those same moms cry and yell in frustration. "This isn't as much fun as...
In this article helps in developing a multi-factor HJM model with separate factors driving the innovations in the yield curve and the stochastic covariance’s of bond yields. The model is estimated by maximum likelihood using panel data on swap rates and swaptions. Under the model with four yield factors and...
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...
