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In this paper, we model price dispersion effects in over-the-counter (OTC) markets to show that, in the presence of inventory risk for dealers and search costs for investors, traded prices may deviate from the expected market valuation of an asset. We interpret this devia- tion as a liquidity...
Persistent link: https://www.econbiz.de/10009480896
We use a unique data set from the Trade Reporting and Compliance Engine (TRACE) to study liquidity e ffects in the US structured product market. Our main contribution is the analysis of the relation between the accuracy in measuring liquidity and the potential degree of disclosure. Having access...
Persistent link: https://www.econbiz.de/10010368433
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We suggest a new parametric framework to assess the accuracy of estimated default probabilities (PDs). Whereas the traditional methods to validate credit rating systems focus primarily on the discriminatory power, recent advances in credit risk management and banking regulation has shifted the...
Persistent link: https://www.econbiz.de/10014214620
We analyze M&A announcements and focus on the potential impact of these deals on bond prices in the US corporate bond market. In particular, we investigate the effect of changes in credit, liquidity and rollover risk. This is important, as especially target firms are often small with rather...
Persistent link: https://www.econbiz.de/10013222553
We examine the recovery rates of defaulted bonds in the US corporate bond market over the time period from 2002 to 2010, based on a complete set of traded prices and volumes. A detailed study of the microstructure of trading in defaulted bonds around various types of default events is provided....
Persistent link: https://www.econbiz.de/10013065532
We analyze the price and liquidity effects in the U.S. corporate bond market caused by the Covid-19 crisis. We carefully consider the different impact of social distancing measures on firms. We find significant cross-sectional differences, i.e., bonds of firms that are more affected by these...
Persistent link: https://www.econbiz.de/10014239778
This paper provides a novel approach to empirically determine prices of bond covenants based on transaction data for the US corporate bond market. Thereby, we are the first to measure price effects over the whole lifetime of bond contracts. We find that covenant prices vary significantly over...
Persistent link: https://www.econbiz.de/10013232339