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Questions tagged [credit]

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

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What are the assumption in the DTS paper

In the original Duration Times Spread paper from Arik Ben Dor , Lev Dynkin, Jay Hyman , Patrick Houweling , Erik van Leeuwen and Olaf Penninga , the authors define a change in spread as follows: ...
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How do you interpret this data about corporate bonds? [closed]

If I have a corporate bond portfolio that has the following relative to the benchmark (this was given to me as interview question): Given an initial portfolio with the following statistics (as of ...
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Spread Duration of a Fixed Rate Corporate Bond, with offsetting Futures Position

My question is relatively simple with respect to the below scenario: I take a $5m long position in a vanilla fixed-rate corporate bond with a spread of 1.50% for a YTM of 5%. These coupons are paid ...
fixedincome94's user avatar
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Corporate Credit Risk Modeling Books

Can anybody refer me to a good corporate credit risk modeling book? I'm looking for something more advanced than what's in Hull's very good risk management book. There seems to be many excellent ...
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First to Default

Hi I would like a clarification on how to price a first to default over a basket of two names with correlation rho=0.2 via Li Model using Gaussian Copula. Up to now I've tried to extract a gaussian ...
Edoardo Pariani's user avatar
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Question about (lLack of) Risk Neutral Bond Pricing in Duffie & Lando (2001)

I have been reading this famous paper of Duffie & Lando (2001) and I have a question regarding how they calculate the price of a bond (the reader of this post will not have to dive deep into the ...
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Bond indices : where to find yields and asset swap spreads by rating and average duration?

I am looking for alternatives or relatively similar information about historical data for yields and/or asset swap spreads for bond indices in major currency. I would like to gather the info by rating ...
Jean Dessain's user avatar
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What is the unit of DTS (and why)?

For bonds I've newly seen the measure DTS, spread duration times spread. The pnl is then approximated $$ V = -DTS \frac{\Delta S}{S}$$ where $S$ the current spread and $\Delta S$ the spread change. My ...
swissy's user avatar
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LQD and IG cash spreads

Can someone please tell me the relationship between LQD and IG cash spreads. what's the movement (widen/tighten) of the spreads can tell me about the market, supply and demand
zeng cece's user avatar
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systematic trading reading fixed income [closed]

I would like to expand my knowledge on systematic strategies in fixed income. I know there are a lot of articles on equity but these markets are different and I would like to know more. Are there good ...
Medan's user avatar
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Credit Spread Replication by Long/ Short Bonds

I am trying to derive the credit spread using an hypothetical portfolio of a long corporate bond plus a short treasury bond, which have the exact cashflows. I should be able to get the credit spread ...
Kingvader Wong's user avatar
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Corp Bond vs cds [closed]

Assume I need to hedge some credit risk. I can buy a bond or cds for it. I see the second option is almost free while the first cost as much as face. Why would people use bonds at all for hedging then?...
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Why do we have CDS + Bond = Treasury?

In section 25.1, sub-section "Credit Default Swaps and Bond Yields", of "OPTIONS, FUTURES, AND OTHER DERIVATIVES", John Hull defines "CDS–bond basis = CDS spread - Bond yield ...
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Assessing Credit Rating Agencies [closed]

Has there been any historical evaluation of the quality of credit ratings provided by agencies such as Fitch, S&P, and Moody's? Are there any academic resources available on this topic? I have ...
John's user avatar
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Using LGD (Loss Given Default) in the trading of bonds

Do you use the LGD as a risk management tool when trading credit cash bonds? Or it's more for trading the loan product.
risknewbie's user avatar
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Equity and Credit Portfolio Return

This might sound like a trivial question but would appreciate the answer. How would you calculate the return of the portfolio consisting of only equity and credit instruments? For example, consider ...
Nick's user avatar
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Simulate correlated credit spread

I want to simulate a credit spread index which is negatively correlated to a given random walk of a stock index. They should be correlated in such a way that larger than average stock growth tend to ...
thijs818's user avatar
1 vote
1 answer
69 views

Equity vs Credit Performance [closed]

When comparing performance of equities (for example S&P 500) versus credit indices (for example US HY) people often adjust equity returns by its beta relative to credit. Can someone please explain ...
Nick's user avatar
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Efficient encoding technique for credit ratings

Is there any categorical encoding technique for credit ratings that take into account the kind of non linear nature of the notches of the credit ratings? The literature standard is the ordinal one ...
wanna_be_quant's user avatar
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Simple (?) question about expected bond returns

Newbie here. I should say upfront that I'm not a quant, just someone trying to broaden his knowledge of fixed income investing. I apologise in advance if I'm mangling some terminology. Imagine a ...
ChrisJ's user avatar
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4 votes
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Is repo-ing out a bond the same as shorting the bond?

In fixed income, or in any other products for that matter, borrowing an asset is essentially shorting the asset. As a result, you would see hard-to-borrow names where the borrow rates are much higher ...
bng's user avatar
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HY and IG CDX Indexes

Where can I get a "tradable quote" and daily historical data on CDX.NA.IG and CDX.NA.HY indexes other than Bloomberg.
ROBERT SMITH's user avatar
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Help with simple derivation of probability of credit default

I'm going over a chapter in Hull's Options, Futures, and Other Derivatives and am stuck on how the probability of default is derived. Here's the image of the derivation. I can follow all of it except ...
Cuber's user avatar
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conditional expectation formula of default in CVA

Here is the formula of CVA in page 74 in book Modern Derivatives Pricing and Credit Exposure Analysis. Here $t_0 = t<t_1<\cdots<t_n = T;$ $\tau$ is the ...
user6703592's user avatar
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Graph of price of CDS against par spread

I'm new to credit and I'm trying to wrap my head around the following idea. I understand that the par spread $s$ is the value of the fixed coupon payment at which the fixed and floating legs are equal ...
Ice Tea's user avatar
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259 views

PCA analysis within Private Credit

A very broad question but nevertheless a important and difficult one. Within private markets (Private Equity funds, infrastructure funds and private credit funds) how should one do a risk-based PCA ...
Jeweller89's user avatar
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220 views

Replicating Bloomberg Barclays index and sub-index monthly total and excess returns using constituent-level index-data

Bloomberg Barclays index returns (e.g. LF98TRUU Index "index_total_return_mtd" & "index_excess_return_mtd") and sub-index returns (e.g. BCBATRUU Index "...
Lepidopterist's user avatar
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346 views

Credit spreads adjusted for rating migration and default

Given the below 1-year rating transition matrix and cumulative default rates, I am interested in calculating credit spread adjusted for defaults so I can compare this with the outright credit spread. ...
Jeweller89's user avatar
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449 views

A list of the 01's in the corporate bonds

I have frequently heard terms like DV01, CV01, PV01. Where can I get a list of these glossaries to study? I am not looking for a detailed explanation, just really a list.. Once I have the list, I can ...
CuriousMind's user avatar
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158 views

What is the way to calculate "Risky PV (Present Value)" (discounting including the probability of default) from bond yield curve?

Instead of using CDS spread to do risky discounting, I would like to use the bond yield curve. Can I directly use the discounting factors from the bond yield curve or do I need to figure out the ...
Hemanth Kusampudi's user avatar
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Liquid products/indexes to hedge/price a corporate bonds portfolio

Generally, for a corporate bonds portfolio, what are the common risk factors that's hedge-able through some liquid products? I know we can hedge the rate-risk through treasuries. We have some ETFs for ...
CuriousMind's user avatar
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CDS spread changes with its recovery rate

Not sure if my question makes any sense because I'm pretty new to the credit market. Suppose I have a 5Y CDS spread which is quoted as 100 bps with 40% recovery rate. So, if I want to estimate another ...
Pandaaaaaaa's user avatar
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462 views

US Market CDS Data during the Corona Pandemic for Bachelor Thesis

I need CDS spread data over the US market. I would need data for an exact period. I can't find the data I need through Bloomberg. Does anyone by any chance have CRSP or WRDS and could help me out?
Mikail Kilic's user avatar
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1 answer
275 views

How to understand "OAS assumes the recovery rate of the bond is 0" and "OAS" does not include credit risk?

My confusion is, the OAS comes from Z-spread with adjustment on option value. Does it mean the z-spread is assuming that the bond never defaults so that it does not include the "credit risk"?...
Lisa's user avatar
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How to convert CDX spread to price?

Example: assume the current HY CDX is with 5% coupon. The spread is around 300bps, with a duration of around 4 years. Would you pls help me to understand why we can proxy the HY CDX price as 100+4*(5%-...
Lisa's user avatar
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How to write a javascript formula for the time to clear debt on a credit card calculator?

I have a web developer creating a credit card calculator in Javascript and need a formula to use for calculating the time to clear debt based on inputs of balance, APR, minimum repayment per month (%) ...
Andrew Maidstone's user avatar
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47 views

Replication of "recovery bond"

I just started learning about credit products. Let $B_t^T$ be the price of a risk free zero coupon bond at time $t$. Similarly, let $C_t^T$ be the price of a zero coupon risky bond from some fixed ...
user357269's user avatar
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estimate credit bond price out of trading hour

How to estimate a credit bond's price out of trading hour ? For example, how to estimated an U.S credit bond's price at 8am london time, when the US bond market is closed? We can decompose a credit ...
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Expected Loss on a Portfolio, which contains an asset and a default protection contract, due to credit defaults

A portfolio consists of one (long) 100 million asset and a default protection contract on this asset. The probability of default over the next year is 10% for the asset, 20% for the counterparty that ...
May's user avatar
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Calculation Expecting Credit Loss from a Portfolio

I have the following question: An investor holds a portfolio of 50 million dollars. This portfolio consists of 'A' rated bonds (30 million dollars) and 'BBB' rated bonds (20 million dollars). Assume ...
May's user avatar
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3 answers
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Comparing asset swap spreads

I am a bit confused when it comes to asset swap spreads of fixed rate bonds vs the same issuers floating rate bonds of the same maturity and issued at the same time. Should these not be comparable (if ...
acchan94's user avatar
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71 views

Books on loans (car, house, etc...), pricing and securitization?

I'm looking for a good book on credit analysis, lending, car loans, house loans, etc... I would like to understand the theory and practice behind it. Most books I google for are for the consumer like ...
confused's user avatar
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1 answer
282 views

Can I calculate the CVA or DVA over a sovereign portfolio?

Hi I haven't understood if I can apply the CVA just for derivatives or I can estimate the PD from CDS spreads and apply these in a bonds portfolio for the CVA calculus. The CVA literature refers to "...
d0whes's user avatar
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quantlib isda cds time-series

I am trying to use quantlib from python to work with time series of cds quote, e.g I would like to evaluate the PV or PUF or other metrics on many different days. Each day has an associated yield ...
Jeremy Taylor's user avatar
4 votes
2 answers
935 views

Why would Basel III prevent price discovery at credit markets?

I'm referring to this interview with Michael Burry. He says: Central banks and Basel III have more or less removed price discovery from the credit markets. Why would Basel III cause this effect?
BlackNinja's user avatar
2 votes
3 answers
510 views

Systematic credit "liquidity provider" strategy

I was reading a piece published by Bloomberg today, where it says the following: “A systematic process lends itself to providing liquidity rather than taking it because our models have views on ...
AK88's user avatar
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1 vote
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Borrowing at a gain (negative rates on bank mortgages, Bloomberg news) [closed]

I have been very curious when I first read the Bloomberg news attached here that the Bundesbank considers such mortgages with negative rates conceivable and would not intervene against them What ...
Fr1's user avatar
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3 votes
2 answers
556 views

Correct Discount Curve for Exchange Traded (Centrally Cleared) Products

What's the correct discount curve to use for exchange traded products? Would these be discounted at the OIS rate (because of the central clearing house)? E.g. the E-Mini S&P500 Future @ CME: I'm ...
Jared's user avatar
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154 views

Price moneyness vs spread moneyness for credit index options (CDX HY)

Is spread moneyness equivalent to price moneyness for volatility surfaces of CDX HY? In other words, is the ISDA converter a linear transformation? I have market data that I need to convert to input ...
Simon Therien's user avatar
2 votes
1 answer
271 views

What are the best relative value frameworks for Corporate Credit?

Fixed Income (Credit) fair value models in the literature tend to be variations on cross-sectional regressions. For a recent example in a factor-model setting, see here. My understanding is that this ...
quant_zero's user avatar