Credit markets
Pricing distressed CDOs with base correlation and stochastic recovery rates
In 2008 and 2009, the calibration of the standard Gaussian copula model for collateralised debt obligations has frequently broken down. To overcome that problem, Martin Krekel has embedded the model with correlated stochastic recovery rates. He shows…
Sovereign debt and CDSs: a collection of articles from Risk.net
The world is watching nervously as sovereign debt is rocked by fiscal and economic crises in the eurozone.
EC proposes tough shorting rules but stalls on CDS ban
Shorting shares and bonds could be restricted or even banned under new EC proposals, but naked credit default swaps are safe for now.
Isda credit auction sets 20% Ambac recovery rate
Protection sellers on monoline face 80% cash value payout
Self-referencing CDS risk?
Ballooning credit default swap spreads on European sovereigns have encouraged some market participants to sell credit protection on their own country. But how much is this protection really worth, and could this selling contribute to systemic risk? Mark…
Spotlight on Goldman
The US Securities and Exchange Commission filed a lawsuit against Goldman Sachs in April, alleging it had misled clients by not disclosing that a major hedge fund had helped select the underlying assets in a collateralised debt obligation and was…
A bottom-up model with top-down dynamics
Yadong Li proposes a flexible, tractable and arbitrage-free bottom-up dynamic correlation modelling framework with a consistent stochastic recovery specification for multi-name credit derivatives. In this framework, the model’s spread dynamics can be…
Highland Capital boss slams shorting restrictions for exacerbating volatility
Credit fund veteran Mark Okada says Bafin restrictions on short selling have increased market volatility
Brazil leads booming sovereign CDS trade
Sovereign CDS transactions eclipsed corporate protection volume in past nine months.
Cut derivatives volumes down to size, says European Parliament report
European Parliament committee calls for a smaller derivatives market, citing "distorting" effect.
Eurozone sovereign CDS blow out after Spain ratings downgrade
Wider sovereign debt insurance costs follow Spanish ratings downgrade and falling equity prices
Korean risk premiums exceed Thailand, ‘raised long term'
Tensions on the Korean peninsula mean CDS prices are likely to stay high for some time, analysts say
CDS spreads tighten for eurozone debt crisis countries
Fall in cost of insuring eurozone sovereign debt follows a volatile week
Goldman CDO suit throws focus on collateral manager conflicts
Goldman Sachs fraud allegations show portfolio managers credit selection interests are often not aligned with benefiting CDO note-holders, say lawyers.
Quiet morning trading on the CDS market after dramatic moves
CDS spreads' volatility earlier in the week over for now
CDS spreads tighten marginally across the eurozone
Eurozone sovereign debt insurance cheapens
Sovereign CDSs cause systemic concern
Increased protection selling on sovereigns raises fears about systemic risk
Eurozone CDS spreads widen as equities plummet
Wider eurozone CDS spreads in early morning trading mirror movements in the equities market
China readies for launch of onshore CDS
Financial risk management tools seen as essential for Chinese bank development
Tipping point?
The global financial crisis has demonstrated the Australian credit default swap market is more liquid than its counterparts in the rest of Asia. Nonetheless, Australian investors have failed to take advantage of large arbitrage opportunities and the…
Eurozone CDS spreads tighten after volatile week
Eurozone sovereign debt insurance cheapens after last week’s volatility
Riksbank's Persson: don't shoot CDS "messenger"
The Swedish central bank uses CDS spreads as an indicator of financial stability
Deutsche Bank halted sovereign CDS trading after Bafin ban
The German bank was not the only dealer to have temporarily put a stop to eurozone sovereign credit default swap trading