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A regime-switching Levy framework, where all parameter values depend on the value of a continuous time Markov chain as per Chevallier and Goutte (2017), is employed to study US Corporate Option-Adjusted Spreads (OASs). For modelling purposes we assume a Normal Inverse Gaussian distribution,...
Persistent link: https://www.econbiz.de/10012896045
We evaluate the impact of the Federal Reserve corporate credit facilities (PMCCF and SMCCF). A third of the positive effect on prices and liquidity occurred on the announcement date. We document immediate pass-through into primary markets, particularly for eligible issuers. Improvements continue...
Persistent link: https://www.econbiz.de/10012249769
We evaluate the impact of the Federal Reserve corporate credit facilities (PMCCF and SMCCF). A third of the positive effect on prices and liquidity occurred on the announcement date. We document immediate pass through into primary markets, particularly for eligible issuers. Improvements continue...
Persistent link: https://www.econbiz.de/10012310585
Markets for risky loans clear on two dimensions - an interest rate (or equivalently a spread above the riskless rate) and a specification of the amount of collateral per dollar of lending. The latter is summarized by the margin or "haircut" associated with the loan. Some key models of endogenous...
Persistent link: https://www.econbiz.de/10012967011
Persistent link: https://www.econbiz.de/10012664614
This paper investigates how the market implicitly prices very long-dated cash-flows. We do this empirically, using daily market data on the 3½% War Loan, a UK infinite maturity coupon bond. We price the War Loan as an American option with 100 years of maturity. To this end, we perform daily...
Persistent link: https://www.econbiz.de/10012955977
Quanto CDS spreads are differences in CDS premiums of the same reference entity but in different currency denominations. Such spreads can arise in arbitrage-free models and depend on the risk of a jump in the exchange rate upon default of the underlying and the covariance between the exchange...
Persistent link: https://www.econbiz.de/10012909325
Recent findings on the term structure of equity and bond yields pose serious challenges to existing equilibrium asset pricing models. This paper presents a new equilibrium model to explain the joint historical dynamics of equity and bond yields (and their yield spreads). Equity/bond yields...
Persistent link: https://www.econbiz.de/10013234720
Some key features in the historical dynamics of U.S. Treasury bond yields – a trend in long-term yields, business cycle movements in short-term yields, and a level shift in yield spreads – pose serious challenges to existing equilibrium asset pricing models. This paper presents a new...
Persistent link: https://www.econbiz.de/10013244575
This paper presents an equilibrium bond-pricing model that jointly explains the upward-sloping nominal and real yield curves and the violation of the expectations hypothesis. Instead of relying on the inflation risk premium, the ambiguity-averse agent faces different amounts of Knightian...
Persistent link: https://www.econbiz.de/10013244576