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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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0answers
18 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 ...
2
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0answers
27 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
36 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 ...
4
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2answers
140 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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0answers
21 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"....
2
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1answer
192 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 ...
7
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2answers
158 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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1answer
75 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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2answers
74 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
145 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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0answers
19 views

Interest risk and credit risk calculations for fung and Hsieh model

I'm running the Fung and Hsieh multifactor model (2004) for European data. I have used the ln returns based on monthly prices (in Euros) from datastream, and I had a few concerns: 1. for interest ...
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2answers
210 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
72 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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0answers
28 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?
1
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1answer
447 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{...
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2answers
518 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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2answers
114 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 ...
3
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1answer
93 views

Simplifying an expectation function of default time and rates

I have the following expectation to calculate : $$ \mathbf{E}\left[ e^{\int_{t_0}^{\tau} r_s ds} \mathbf{1}_{\{\tau < T\}}\right] $$ More precisely, I want to show that : $$ \mathbf{E}\left[ e^{\...
2
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1answer
257 views

Markit recovery rates : assumed vs real

I often see two different recovery rates in Markit : real recovery rate and assumed recovery rate. What is the difference between them ?
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2answers
548 views

Why do we swap the bond value and par value at the beginning in the Asset Swap

I may asked this question before, but I still don't understand. We know that in a asset swap, A pays the fixed coupon on the bond B pays LIBOR + Spread The exchanges take place regardless of ...
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0answers
205 views

Negative correlation between interest rates and credit spreads - Why?

In fixed income markets a stylized fact seems to be that there is a negative correlation between interest rates and credit spreads: Spreads tend to widen as rates fall. Why is that?
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0answers
345 views

Importance of z-spread in CDS-Bond Basis trading

Consider the following: A bond with a 9% coupon and a price of $98. Let's say the zero swap curve is flat at around 7% (e.g. the zero swap curve is high because we're at the end of a business cycle). ...
0
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1answer
45 views

YTM of a Fixed-Income Loan?

I'm quite confused regarding the computation of a YTM. I got a Portfolio of Single Loans 30Y(like a MBS) which are not traded and hence do not have a market price. Now I want to compute the YTM in ...
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1answer
80 views

Literature on credit risk premia

I am looking for a comprehensive ressource describing known strategies of credit risk premia. Is there such kind of articles/books/websites?
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0answers
122 views

Credit quotations with which ISDA models?

I understand that single name liquid CDSs are (roughly speaking) quoted through either upfront+coupon, spread or price, and that for the pricing, the ISDA standard model is used : among other ...
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0answers
301 views

Altman Z-Score model for PD calculation [duplicate]

I am approaching you with one important for me question. I have a task to calculate probability of default for our clients. I used an Altman Z-Score model to calculate the Z-Scores for each client. ...
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2answers
76 views

Prepayment-Data : Open Databases?

I want to do empirical research regarding prepayment behaviour on mortgage credits. Is there any public data provided online regarding this topic? I'm especially interessted in mortgage/retail credit ...
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2answers
951 views

dataset on Credit Default Swap [duplicate]

I would like to have the CDS for the main countries. Do you know where I could find these data free to use? Thanks a lot
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1answer
63 views

Pricing Debt/Credit/Mortgage+ Prepayment- Literature?

Does someone know some good literature(Papers or Books) regarding the topic how to Price debt/credit with prepayment? I just found literature about the general topic , like how to price callable bonds,...
2
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0answers
822 views

Free Data Source for Credit Spreads?

Credit spreads are a key economic indicator. They are the difference between yields on corporate and government debt. They are a measure of confidence in the private sector, they provide insight into ...
1
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1answer
71 views

Is a CDS spread a spread in a typical sense

I have a basic question that's causing me some confusion. I see discussion of a "CDS spread," defined as the cost of protection. Are these the same as a bid-ask spread? Is there any relation between ...
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2answers
106 views

How do I interpret the credit rating history time series?

This is the best historical time series which I could find from tradingeconomics.com/malaysia/rating. It would be great if someone could answer my question. I am currently researching on the topic of ...
5
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6answers
11k views

What's the difference between credit risk and counterparty credit risk?

As the title reads, what is the difference between credit risk and counterparty credit risk? What are the key differences?
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3answers
219 views

Is a bondfuture an IRD or a Credit Derivative?

I need to categorize a BondFuture trade in one of the five major asset classes and I am not sure if it should put it to the interest rate asset class or the credit asset class. A quick (and dirty) ...
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1answer
887 views

What is Treasury Credit Risk?

I know that there are Treasury Credit Teams in Banks, so I would like to know what Treasury Credit is? I would also like to know the difference between Treasury Credit Risk and Credit Risk?
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1answer
108 views

Right expression for the semi-annually compounded credit spreads?

I'm familiar with the expression for a (continuously compounded) credit spread of the form $$ c(t,T) = -\frac{1}{T-t} \ln \frac{v(t,T)}{p(t,T)},$$ where $p(t,T)$ denotes the time $t$ price of a $T$-...
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2answers
246 views

How do you quantify credit risk?

I am trying to figure out how to quantify the change in price on a bond for a change in credit risk. I'm not even sure how to quantify a change in credit risk, but I'm thinking possibly something ...
2
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0answers
219 views

US Rule versus Actuarial Method for calculating interest

I'm trying to understand the difference between the actuarial method and the U.S. Rule for calculating interest. I think the difference is that the actuarial rule adds unpaid interest to the principal ...
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0answers
44 views

First coupon CDO tranche

I am interested in Tranches on Credit Indexes. Let $T$ be the trade date, let $t_1<T<t_2$ be the accrual dates surrounding the trade date. I would like to know which option is correct ? A) ...
4
votes
1answer
56 views

STCDO upper tranche still paying coupons even after all default

We assume : that a CDO on $n$ names, with a maturity $T$ that at a time $\tau<T$ before the maturity of the CDO, these $n$ names have defaulted, that we are the protection buyer of the 22-100 ...
12
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3answers
812 views

Validating a Credit Scoring Model without Data

Fellow Quants, Suppose you have a credit scoring model that is developed without the aid of statistics, because (unfortunately) there is no historical default/loss data in your portfolio. The ...
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1answer
38 views

Modeling credit utilization and stock market growth

I relatively new to financial mathematics but I am wondering if at all there exists a relationship between credit utilization (the rate at which the public accesses credit from financial institutions) ...
5
votes
1answer
693 views

How to interpret this CDS spread sensitivity pattern?

From page 27, Table 6: Why are sensitivities of CDS slightly negative before the maturity of the CDS? I do not get the intuition: if I am long a 5-year CDS, the spreads <5y increase, and the 5y ...
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0answers
75 views

Calculate and compare IRR among products and companies

I am trying to calculate return on investment for a couple of companies and their respective products. I have two main products: credit card installment loan Owners would like to be able to compare ...
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0answers
31 views

how does a bond maturing affect the pricing of the corresponding CDS?

if a bond matures, and there is no other existing bond from the legal entity that has not matured. Then how does that affect the CDS that corresponds to that bond?
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0answers
411 views

Forward Credit Spreads

I have a beginner question in credit quantitative modelling. I would like to know how we can derive forward credit spread curve, i.e the counterparty of forward yield curves. Indeed, for deriving a ...
3
votes
1answer
184 views

What are recent important papers on credit portfolio risk modeling?

I'm interested in papers which consider mathematical models of risks of different portfolios of retail credit. This is not my area of research, so I may be misusing some terms. The idea is simple: I ...
4
votes
1answer
386 views

When do CDS curves yield arbitrage opportunities?

In CDS markets we can sometimes observe inverted CDS curves or unusually steep curves. I am just wondering at what level certain curves become non-realistic. E.g. if we have 500bp for the 1-Year ...
3
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0answers
90 views

Basket Default Swap (BDS)

I would like to understand better the $n^{th}$ to default pair spreads of a basket default swap containing $m>n$ entities. For example, consider 2 single name CDS's with same spread and same ...
6
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1answer
152 views

Best simplified way to model volatility in returns of an investment in a risky fixed income asset

I am currently working on a project where I have analyzed a certain category of fixd income instruments, and I now have the gross aggregate yield as well as the theoretical gross-aggregate default-...