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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49 views

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 ...
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18 views

What are some tools to help optimize size of an ABS portfolio with many constraints?

What are some tools (python preferred) used in the ABS industry to optimize the size of a credit portfolio, given many constraints? Constraints can be things like Weighted Average Credit Metric (e.g. ...
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49 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 ...
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72 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 "...
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40 views

Historical Data

Could you please help to refer few sources where can I get Credit spread data (historical time series) for various credit ratings...
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50 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. ...
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74 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 ...
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46 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 ...
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1answer
57 views

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 ...
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171 views

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 ...
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40 views

What is the "recursive moral hazard theory" of "trade credit"?

When reading a recently published paper, I saw the paragraph We construct a sample of over 200,000 supply chains to conduct a chain-based analysis of trade credit. Our study uncovers novel stylized ...
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1answer
65 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?
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34 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"?...
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180 views

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%-...
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62 views

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 (%) ...
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36 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 ...
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27 views

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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41 views

Credit VaR for this portfolio assuming no default correlation and no recovery?

I am trying to estimate the Credit VaR for a portfolio of two risky bonds. The Credit VaR is defined as the maximum unexpected loss at a confidence level of 99.9% over a one-month horizon. Assuming ...
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1answer
58 views

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 ...
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1answer
51 views

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 ...
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243 views

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 ...
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42 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 ...
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153 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 "...
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116 views

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 ...
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897 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?
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398 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 ...
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21 views

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 ...
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314 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 ...
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67 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 ...
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1answer
151 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 ...
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81 views

CDS pricing using intensity models incorporating liquidity

I want to price a CDS using an intensity based model, but I want to account for liquidity as well. General model: The default time $\tau$ is the first jump time of a cox process, and the survival ...
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1answer
131 views

How do Repo traders use OIS and Fed fund rates

I would like to know how do Repo traders use FED Fund rates and OIS to cover themselves. For example assuming the repo trader bought paper(borrwed paper/lent cash) in the 1 year. How do they cover ...
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116 views

Developing Markov Transition Matrix

I’m working with historical credit performance data and would like to build a transition matrix to predict defaults and delinquencies. I can model the transition between states (ie current - ...
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1answer
92 views

Calculate the implied loss rate on a loan, given the interest charged

My bank has a retail credit portfolio of 100 million in loans. I know the payment history,balance history of all these loans since inception. Are there any tools to calculate an expected loss, a loss ...
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425 views

Need to solve the stochastic differential equation of Vasicek Model

How to solve the stochastic differential equation of the Vasicek model for the analysis of credit risk? I search in the article "The Distribution of loan portfolio value" (Vasicek) but he doesn't ...
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31 views

Flattening a Credit Loss Curve

I have a credit loss curve for 36 months and I want to transform that curve into a 20 months curve without changing its final loss. My credit loss vector is a % of unpaid principal balance in a ...
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2answers
57 views

Are Credit Default Swaps used by B2B Service providers or Vendors?

I understand CDS's are often employed in trading strategies between institutions - That is well publicized. What isn't as publicized is how other customers might look to use a CDS. I work in an ...
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962 views

"Where is my money": CDS Sensitivities, Spreads and PnL Calculations

Trading CDS I experienced something unexpected: A half year ago I sold protection on a single name at a spread of 190bp The coupon was 5% and the contract had a maturity of five years. Using ...
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42 views

Collateral Mortgage Obligation Z-Tranches

I would like to inquire about a specific type of Z-Tranches used in CMOs As part of the different collateral mortgage obligation (CMO) structures, we see a specific type of tranches named "Z-Tranche"....
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1k views

Hedging Ratios for Fixed Income Instruments

If you buy a corporate bond and you want to hedge the interest rate risk, how would you know how many interest rate futures/swaps to hedge the bond with? The same with an MBS security, if you want to ...
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554 views

Relationship between BBB credit spreads and rising interest rates

A stylized fact in markets seems to be that there is a negative correlation between interest rates and corporate spreads - as interest rates rise, spreads tend to tighten and vice versa. I'm ...
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112 views

different Z-spreads for a same company

A same company has two different bonds. I expected the Z-spread to be close for both bonds (since my representation of the Z-spread is the spread due to credit-risk proper to the company). Here is an ...
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93 views

credit spread ajustment considering currency

I would like to understand what is credit spread basis currency ajustment. credit spread implied by a usd bond won't be the same as one implied by a chf bond, isn't it ? Do you have any elements (...
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4answers
315 views

Intuitively, why does liquidity premium contribute to bond yield?

According to the Wikipedia, "The upwards-curving component of the interest yield can be explained by the liquidity premium... Liquidity risk premiums are recommended to be used with longer term ...
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2answers
964 views

Bond recovery rate with coupon

Suppose a bond has annual coupon of \$1 and face value of \$100 and matures in two years. If recovery rate is $50\%$ and the bond defaults before the first coupon payment. How should we receive the ...
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1answer
108 views

Libor Swap Rates

In a 5 year Libor Swap, say fixed vs. 3 months Libor, what is the credit risk reflected by the fixed leg ? (I'm ignoring counterparty credit risk). Would the fixed leg reflect 3 month Libor quoting ...
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30 views

where can i get historical daily price data of counties (especially for turkey) CDS prices? [duplicate]

i need countries historical CDS prices (especially for Turkey) but i am failed to find. can anyone suggest me a website please?
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1answer
2k views

Mark to Market of a CDS Contract and Risky Annuities

From JP Morgan's Trading Credit Curves 1 and we have that: The MTM of a CDS contract is (for a sell of protection) therefore: $$\text{MTM} = (S_{\text{Initial}}-S_{\text{Current}}).\text{Risky ...
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2k views

Accrual in Default Derivation of Credit CDS Curve

In Trading Credit Curves Part I by JP Morgan we have that each point on a credit (CDS) curve represents: $$PV(\text{Fee Leg}) = PV(\text{Contingent Leg})$$ which is $$S_n \sum_{i=1}^{n}\Delta_i ...
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219 views

CDS Indices Query

I'm just getting into Credit derivatives at the moment but I'm having a bit of trouble with the technicalities of CDS Indices(CDX etc.) My question is. Given that CDS indices have fixed lifetime, is ...