Download or read book The Risks and Benefits of Credit Default Swaps and the Impact of a New Regulatory Environment written by Christoph Theis and published by Haupt Verlag AG. This book was released on 2014 with total page 152 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seit dem Ausbruch der jüngsten Finanzkrise sind Credit Default Swaps (CDS) ins Rampenlicht des akademischen und medialen Interesses gerückt und bilden seitdem den Gegenstand einer kontroversen Diskussion. Auf Europäischer Ebene werden zudem neue regulatorische Rahmenbedingungen eingeführt, die weitreichende Auswirkungen auf den CDS Markt haben werden. Die angesprochenen Kontroversen sowie die bevorstehenden regulatorischen Veränderungen machen den CDS Markt daher zu einem spannenden und wichtigen Forschungsgegenstand. Die vorliegende Dissertation beschäftigt sich in vier Forschungsarbeiten mit den Implikationen des Einsatzes von CDS auf Marktteilnehmer und gibt im speziellen Antworten auf offene Fragen hinsichtlich der Anwendung von Kreditrisikomodellen, des Nutzens und der Risiken von CDS und den Auswirkungen neuer Regulierungen auf den CDS Markt. In Kapitel I werden die theoretischen Grundlagen zur Messung des Kreditrisikos gelegt, wobei der Fokus auf der praktischen Anwendung von Kreditrisikomodellen liegt. Hierbei untersuche ich die zwei gängigsten Kreditrisikomodelle: den firmenwertbasierten sowie den intensitätsbasierten Ansatz. Dabei gewinne ich wichtige Einblicke in den Einsatz von Kreditrisikomodellen im Zusammenhang mit der Nutzung von Kreditderivaten. In Kapitel II werden der Nutzen und die Risiken von CDS unter theoretischen und empirischen Gesichtspunkten einer Analyse unterzogen. Basierend auf der Analyse werden nachfolgend regulatorische Handlungsempfehlungen abgeleitet und diskutiert. Die Ergebnisse zeitigen eine Reihe von Risiken, die sich insbesondere in Krisenzeiten verstärken und daher effektivere zukünftige Regulierungen verlangen. Kapitel III konzentriert sich auf neue regulatorische Anforderungen im CDS Markt. Dabei liegt der Fokus auf der Ausgestaltung der Zentralen Gegenparteien und den Auswirkungen deren Einführung auf die Marktteilnehmer. Die Ergebnisse zeigen, dass Zentrale Gegenparteien ein.
Download or read book Credit Default Swaps written by Marti Subrahmanyam and published by Now Publishers. This book was released on 2014-12-19 with total page 150 pages. Available in PDF, EPUB and Kindle. Book excerpt: Credit Default Swaps: A Survey is the most comprehensive review of all major research domains involving credit default swaps (CDS). CDS have been growing in importance in the global financial markets. However, their role has been hotly debated, in industry and academia, particularly since the credit crisis of 2007-2009. The authors review the extant literature on CDS that has accumulated over the past two decades and divide the survey into seven topics after providing a broad overview in the introduction. The second section traces the historical development of CDS markets and provides an introduction to CDS contract definitions and conventions. The third section discusses the pricing of CDS, from the perspective of no-arbitrage principles, structural, and reduced-form credit risk models. It also summarizes the literature on the determinants of CDS spreads, with a focus on the role of fundamental credit risk factors, liquidity and counterparty risk. The fourth section discusses how the development of the CDS market has affected the characteristics of the bond and equity markets, with an emphasis on market efficiency, price discovery, information flow, and liquidity. Attention is also paid to the CDS-bond basis, the wedge between the pricing of the CDS and its reference bond, and the mispricing between the CDS and the equity market. The fifth section examines the effect of CDS trading on firms' credit and bankruptcy risk, and how it affects corporate financial policy, including bond issuance, capital structure, liquidity management, and corporate governance. The sixth section analyzes how CDS impact the economic incentives of financial intermediaries. The seventh section reviews the growing literature on sovereign CDS and highlights the major differences between the sovereign and corporate CDS markets. The eighth section discusses CDS indices, especially the role of synthetic CDS index products backed by residential mortgage-backed securities during the financial crisis. The authors close with our suggestions for promising future research directions on CDS contracts and markets.
Download or read book Credit Default Swaps written by Patrick Augustin and published by . This book was released on 2015 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Credit default swaps (CDS) have grown to be a multi-trillion-dollar, globally important market. The academic literature on CDS has developed in parallel with the market practices, public debates, and regulatory initiatives in this market. We selectively review the extant literature, identify remaining gaps, and suggest directions for future research. We present a narrative including the following four aspects. First, we discuss the benefits and costs of CDS, emphasizing the need for more research in order to better understand the welfare implications. Second, we provide an overview of the post-crisis market structure and the new regulatory framework for CDS. Third, we place CDS in the intersection of law and finance, focusing on agency conflicts and financial intermediation. Last, we examine the role of CDS in international finance, especially during and after the recent sovereign credit crises.
Download or read book Credit Default Swaps written by Christopher L. Culp and published by Springer. This book was released on 2018-07-12 with total page 331 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book, unique in its composition, reviews the academic empirical literature on how CDSs actually work in practice, including during distressed times of market crises. It also discusses the mechanics of single-name and index CDSs, the theoretical costs and benefits of CDSs, as well as comprehensively summarizes the empirical evidence on important aspects of these instruments of risk transfer. Full-time academics, researchers at financial institutions, and students will benefit from the dispassionate and comprehensive summary of the academic literature; they can read this book instead of identifying, collecting, and reading the hundreds of academic articles on the important subject of credit risk transfer using derivatives and benefit from the synthesis of the literature provided.
Download or read book Managing Climate Risk in the U S Financial System written by Leonardo Martinez-Diaz and published by U.S. Commodity Futures Trading Commission . This book was released on 2020-09-09 with total page 196 pages. Available in PDF, EPUB and Kindle. Book excerpt: This publication serves as a roadmap for exploring and managing climate risk in the U.S. financial system. It is the first major climate publication by a U.S. financial regulator. The central message is that U.S. financial regulators must recognize that climate change poses serious emerging risks to the U.S. financial system, and they should move urgently and decisively to measure, understand, and address these risks. Achieving this goal calls for strengthening regulators’ capabilities, expertise, and data and tools to better monitor, analyze, and quantify climate risks. It calls for working closely with the private sector to ensure that financial institutions and market participants do the same. And it calls for policy and regulatory choices that are flexible, open-ended, and adaptable to new information about climate change and its risks, based on close and iterative dialogue with the private sector. At the same time, the financial community should not simply be reactive—it should provide solutions. Regulators should recognize that the financial system can itself be a catalyst for investments that accelerate economic resilience and the transition to a net-zero emissions economy. Financial innovations, in the form of new financial products, services, and technologies, can help the U.S. economy better manage climate risk and help channel more capital into technologies essential for the transition. https://doi.org/10.5281/zenodo.5247742
Download or read book Pricing Credit Default Swap Subject to Counterparty Risk and Collateralization written by Alan White and published by GRIN Verlag. This book was released on 2018-03-26 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research Paper (undergraduate) from the year 2018 in the subject Business economics - Investment and Finance, grade: 10, , language: English, abstract: This article presents a new model for valuing a credit default swap (CDS) contract that is affected by multiple credit risks of the buyer, seller and reference entity. We show that default dependency has a significant impact on asset pricing. In fact, correlated default risk is one of the most pervasive threats in financial markets. We also show that a fully collateralized CDS is not equivalent to a risk-free one. In other words, full collateralization cannot eliminate counterparty risk completely in the CDS market.
Download or read book Regulation Credit Risk Transfer with CDS and Bank Lending written by Thilo Pausch and published by . This book was released on 2016 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: We integrate Basel II (and III) regulations into the industrial organization approach to banking and analyze the interaction between capital adequacy regulation and credit risk transfer with credit default swaps (CDS) including its effect on lending behavior and risk sensitivity of a risk-neutral bank. CDS contracts may be used to hedge a bank's credit risk exposure at a certain (potentially distorted) price. Regulation is found to induce the risk-neutral bank to behave in a more risk-sensitive way: Compared to a situation without regulation the optimal volume of loans decreases more as the riskiness of loansincreases. CDS trading is found to interact with the former effect when regulation accepts CDS as an instrument to mitigate credit risk. Under the substitution approach in Basel II (and III) a risk-neutral bank will over-, fully or under-hedge its total exposure to credit risk conditional on the CDS price being downward biased, unbiased or upward biased. However, the substitution approach weakens the tendency to over-hedge or under-hedge when CDS markets are biased. This promotes the intention of the Basel II (and III) regulations to 'strengthen the soundness and stability of banks'
Download or read book International Convergence of Capital Measurement and Capital Standards written by and published by Lulu.com. This book was released on 2004 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Pricing of Credit Default Swaps During Distress written by Jochen R. Andritzky and published by International Monetary Fund. This book was released on 2006-11 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: Credit default swaps (CDS) provide the buyer with insurance against certain types of credit events by entitling him to exchange any of the bonds permitted as deliverable against their par value. Unlike bonds, whose risk spreads are assumed to be the product of default risk and loss rate, CDS are par instruments, and their spreads reflect the partial recovery of the delivered bond's face value. This paper addresses the implications of the difference between bond and CDS spreads and shows the extent to which the recovery assumption matters for determining CDS spreads. A no-arbitrage argument is applied to extract recovery rates from CDS and bond markets, using data from Brazil's distress in 2002-03. Results are related to the observation that preemptive restructurings are now more common than straight defaults in sovereign bond markets and that this leads to a decoupling of CDS and bond spreads.
Download or read book Systemic Risk written by Orice M. Williams and published by . This book was released on 2009 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: The U.S. financial system is more prone to systemic risk today because (1) the current U.S. financial regulatory system is not designed to adequately oversee today's large and interconnected financial institutions, (2) not all financial activities and institutions fall under the direct purview of financial regulators, and (3) market innovations have led to the creation of new and sometimes complex products that were not envisioned as the current regulatory system developed. Credit default swaps (CDS) are one of the products that have assumed a key role in financial markets. My statement will discuss (1) the extent to which U.S. financial regulators and the UK regulator oversee CDS, (2) risks and challenges that CDS present to the stability of financial markets and institutions and similar concerns that other products may pose, and (3) the recent steps that financial regulators and the industry have taken to address risks pose by CDS and similar efforts that may be warranted for other financial products. GAO reviewed research studies and congressional testimonies. We interviewed financial regulators and a variety of financial market participants. In January 2009, GAO designated the financial regulatory system as a high-risk area in need of congressional attention. Issues involving systemic risk regulation in general and CDS in particular should be considered as part of that effort. The current regulatory structure for CDS does not provide any one regulator with authority over all participants in the CDS market, making it difficult to monitor and manage potential systemic risk. Federal oversight of CDS trading and monitoring of the CDS market are largely conducted through the banking regulators' safety and soundness oversight of supervised banks that act as CDS dealers. The Securities and Exchange Commission and the Commodity Futures Trading Commission lack the authority to regulate CDS broadly as financial products. Regulators have sought to address potential systemic risks arising from CDS activities mainly through collaborative efforts with other supervisors and key market participants. However, the extent to which regulators routinely monitor the CDS activity of unregulated market participants is unclear. The Financial Services Authority in the United Kingdom has authority over most CDS products and can collect information about the CDS market, but it has pursued most of its regulatory efforts in collaboration with U.S. regulators. CDS pose a number of risks to institutions and markets, many of which are not unique. These include counterparty credit, operational, concentration, and jump-to-default risks. Market participants and observers noted that CDS referencing asset-backed securities (ABS) and collateralized debt obligations (CDOs), particularly those related to mortgages, currently pose greater risks to institutions and markets than other types of CDS. Other risks and challenges from CDS relate to the lack of transparency in CDS markets, the potential for manipulation related to the use of CDS as a price discovery mechanism, and the use of CDS for speculative purposes. Regulators and market participants noted that over-the-counter (OTC) derivatives, to varying degrees, may pose some similar risks and a few identified equity derivatives as the OTC derivatives that were most similar to CDS. Financial regulators and market participants have initiated several efforts to mitigate these risks. These efforts target primarily operational and counterparty credit risks and include improving the operational infrastructure of CDS markets, creating a clearinghouse or central counterparty process to clear CDS trades, and establishing a central trade registry for CDS. If effectively implemented and sustained, these initiatives could begin to address some of the risks noted. But the effectiveness of these recent initiatives could be limited because participation is voluntary and regulators lack the authority to require all market participants to report their trades to a repository. Moreover, customized and highly structured CDS, which can include CDS with complex reference entities that may present additional risks, generally lack the standardization necessary for centralized clearing. Other ideas to reform CDS markets, such as mandatory clearing or limiting some types of trades, have important limitations that would need to be addressed. Finally, many participants and observers agreed that OTC derivatives other than CDS generally share some of the same risks and could benefit from similar efforts to mitigate their impact.
Download or read book The Financial Crisis Inquiry Report written by Financial Crisis Inquiry Commission and published by Cosimo, Inc.. This book was released on 2011-05-01 with total page 692 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Financial Crisis Inquiry Report, published by the U.S. Government and the Financial Crisis Inquiry Commission in early 2011, is the official government report on the United States financial collapse and the review of major financial institutions that bankrupted and failed, or would have without help from the government. The commission and the report were implemented after Congress passed an act in 2009 to review and prevent fraudulent activity. The report details, among other things, the periods before, during, and after the crisis, what led up to it, and analyses of subprime mortgage lending, credit expansion and banking policies, the collapse of companies like Fannie Mae and Freddie Mac, and the federal bailouts of Lehman and AIG. It also discusses the aftermath of the fallout and our current state. This report should be of interest to anyone concerned about the financial situation in the U.S. and around the world.THE FINANCIAL CRISIS INQUIRY COMMISSION is an independent, bi-partisan, government-appointed panel of 10 people that was created to "examine the causes, domestic and global, of the current financial and economic crisis in the United States." It was established as part of the Fraud Enforcement and Recovery Act of 2009. The commission consisted of private citizens with expertise in economics and finance, banking, housing, market regulation, and consumer protection. They examined and reported on "the collapse of major financial institutions that failed or would have failed if not for exceptional assistance from the government."News Dissector DANNY SCHECHTER is a journalist, blogger and filmmaker. He has been reporting on economic crises since the 1980's when he was with ABC News. His film In Debt We Trust warned of the economic meltdown in 2006. He has since written three books on the subject including Plunder: Investigating Our Economic Calamity (Cosimo Books, 2008), and The Crime Of Our Time: Why Wall Street Is Not Too Big to Jail (Disinfo Books, 2011), a companion to his latest film Plunder The Crime Of Our Time. He can be reached online at www.newsdissector.com.
Download or read book Technology and Privacy written by Philip Agre and published by MIT Press. This book was released on 1998 with total page 342 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the last several years, the realm of technology and privacy has been transformed, creating a landscape that is both dangerous and encouraging. Significant changes include large increases in communications bandwidths; the widespread adoption of computer networking and public-key cryptography; new digital media that support a wide range of social relationships; a massive body of practical experience in the development and application of data-protection laws; and the rapid globalization of manufacturing, culture, and policy making. The essays in this book provide a new conceptual framework for the analysis and debate of privacy policy and for the design and development of information systems.
Download or read book Creating a Safer Financial System written by José Vinãls and published by International Monetary Fund. This book was released on 2013-05-14 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: The U.S., the U.K., and more recently, the E.U., have proposed policy measures directly targeting complexity and business structures of banks. Unlike other, price-based reforms (e.g., Basel 3 and G-SIFI surcharges), these proposals have been developed unilaterally with material differences in scope, design and implementation schedules. This may exacerbate cross-border regulatory arbitrage and put a further burden on consolidated supervision and cross-border resolution. This paper provides an analysis of the potential implications of implementing different structural policy measures. It proposes a pragmatic and coordinated approach to development of these policies to reduce risk of regulatory arbitrage and minimize unintended consequences. In doing so, it also aims to identify a set of common policy measures that countries could adopt to re-scope bank business models and corporate structures.
Download or read book Risk Management and Regulation written by Tobias Adrian and published by International Monetary Fund. This book was released on 2018-08-01 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: The evolution of risk management has resulted from the interplay of financial crises, risk management practices, and regulatory actions. In the 1970s, research lay the intellectual foundations for the risk management practices that were systematically implemented in the 1980s as bond trading revolutionized Wall Street. Quants developed dynamic hedging, Value-at-Risk, and credit risk models based on the insights of financial economics. In parallel, the Basel I framework created a level playing field among banks across countries. Following the 1987 stock market crash, the near failure of Salomon Brothers, and the failure of Drexel Burnham Lambert, in 1996 the Basel Committee on Banking Supervision published the Market Risk Amendment to the Basel I Capital Accord; the amendment went into effect in 1998. It led to a migration of bank risk management practices toward market risk regulations. The framework was further developed in the Basel II Accord, which, however, from the very beginning, was labeled as being procyclical due to the reliance of capital requirements on contemporaneous volatility estimates. Indeed, the failure to measure and manage risk adequately can be viewed as a key contributor to the 2008 global financial crisis. Subsequent innovations in risk management practices have been dominated by regulatory innovations, including capital and liquidity stress testing, macroprudential surcharges, resolution regimes, and countercyclical capital requirements.
Download or read book Credit Default Swap Markets in the Global Economy written by Go Tamakoshi and published by Routledge. This book was released on 2018-01-19 with total page 170 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides a comprehensive overview for various segments of the global credit default swap (CDS) markets, touching upon how they were affected by the recent financial turmoil. The book uses empirical analysis on credit default swap markets, applying advanced econometric methodologies to the time series data. It covers not only well-studied sovereign credit default swap markets but also sector credit default swap indices (i.e., CDS index for the banking sector) and corporate credit default swap indices (i.e., Markit iTraxx Japan CDS index), which have not been fully examined by the previous literature. The book also investigates causality and co-movement among several credit default swap markets, or between CDS and other financial markets.
Download or read book Building the New Derivatives Regulatory Framework written by United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs and published by . This book was released on 2011 with total page 132 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Hearing to Review Derivatives Legislation written by United States. Congress. House. Committee on Agriculture and published by . This book was released on 2009 with total page 300 pages. Available in PDF, EPUB and Kindle. Book excerpt:
