Fixed-income instruments whose price depends in large part upon judgments of the creditworthiness of a corporation or government.

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119 views

On the interface between Quant finance and actuarial-science/insurance-math

Actuaries (at least in Europe) are frequently severily lacking in quant finance topics. At best they are familiar with B&S model. People going into quant finane or striving to become a quant on ...
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1answer
37 views

How does buying back stock affect a company's credit spread?

How does buying back stock affect a company's credit spread? Would it cause it to get smaller? Any clarification would be appreciated.
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1answer
79 views

Interest Rate Swaps on Mortgages [closed]

Is it possible to get interest rate swaps on mortgages? If not, why not? Are there models that describe this? Any direction would be great.
2
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1answer
47 views

Finding Credit Risk Population Data

Are there any free or relatively cheap sources of aggregate data on credit risk for specific geographic regions, ages, and so on?
3
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1answer
411 views

How is the default probability implied from market implied CDS spreads for CVA/DVA calculation?

From point 38 on P.17 the default probability can be implied from market implied CDS spreads. "Macro Surface" method is mentioned, but I cannot get any clue of what it is? Where do I get the acedemic ...
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vote
2answers
79 views

moody's credit ratings for senior unsecured bonds

Can 2 senior unsecured bonds from the same obligor have different moody's credit ratings? Or do they both have to have the same rating because they are in the same capital structure? Thanks
3
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3answers
1k views

relation between asset's and equity volatilities - merton model

In terms of Merton credit risk model need to find the initial value of counterparty's assets and the volatility of the assets. Both value are not directly observable thus we have to approximate them ...
7
votes
4answers
641 views

Multi Factor Credit Risk Models

I am working in the area of building credit risk models. Upto this point, the model I have been focused on using the Asymptotic Single Factor Model, more popularly known as Vasicek Single Factor ...
1
vote
1answer
420 views

What is a standard credit default swap contract and where can I find spread data? What alternatives exist to judge creditworthiness?

I'm doing some work for a company and one of my tasks is to research credit default swaps on banks and to write a page about them explaining what they are and how they're used to evaluate the banks' ...
2
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0answers
291 views

What is an appropriate hedge ratio for hedging a credit instrument with equity of the same issuer?

Given a bond and a stock issued by the same issuer, what is the appropriate ratio of bond-to-stock one should hold in order to minimize the specific risk to that issuer? Equivalently, what is the ...
5
votes
2answers
288 views

How to define and measure liquidity or funding premium in credit markets?

Even companies with just a single non-callable corporate bond outstanding will often have CDS quote spreads that differ from the bond quote spread. During the 2008 crisis, there were dozens of cases ...
7
votes
1answer
2k views

How to estimate probability of default from bond prices?

How do you use bond prices/yields to infer probabilities of default? I would think of it as follows: Create a relationship between default free (e.g., Germany) and defaultable (e.g., Greece) bond ...
5
votes
1answer
1k views

What is the unit of the Distance to Default measure?

I read in a book that the distance to default of a company is "2.978". Can anyone please tell me what is the unit implied behind this measure? Are they "years" for instance?
5
votes
2answers
615 views

Credit Valuation Adjustments — computation issues

I'm currently working on my Masters project related to accelerating Greeks computations for CVA on mixed interest rate portfolios. I would like to know about the status of technology for CVA and its ...
8
votes
4answers
3k views

Quanto CDS modeling

What is the market standard for pricing quanto CDS (i.e. CDS which pays the contingent leg in different currency than the pricing leg)?
6
votes
2answers
301 views

Stochastic recovery rates

How do I model the randomness of recovery rate given default when pricing credit derivatives?
13
votes
2answers
789 views

What are the limitations of Gaussian copulas in respect to pricing credit derivatives?

The practice of using Gaussian copulas in modeling credit derivatives has come under a lot of criticism in the past few years. What are the major arguments against using the copula method in this ...
14
votes
2answers
628 views

Concentration risk in credit portfolio

How do you model concentration risk of credit portfolio in IRB/Basel II framework?