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Sources of bond risk

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  • Lecture Money and banking - Lecture 16 include all of the following: Bonds and risk, default risk, inflation risk, interest rate risk, bond ratings, bond ratings and risk, tax effect.

    pdf27p tangtuy20 28-07-2016 35 2   Download

  • In the last decade rating-based models have become very popular in credit risk management. These systems use the rating of a company as the decisive variable to evaluate the default risk of a bond or loan. The popularity is due to the straightforwardness of the approach, and to the upcoming new capital accord (Basel II), which allows banks to base their capital requirements on internal as well as external rating systems.

    pdf256p tieungot 24-01-2013 106 30   Download

  • In recent years, Japan’s major corporations have increasingly relied on the corporate bond market as a source of debt finance. From 1996 to 1998, the issuance of corporate bonds increased more than 46 percent, from 30.8 trillion yen to about 45 trillion yen (Table 1).1 At the same time, loans from Japan’s banking sector decreased about 17 trillion yen. As the corporate bond market grew, the spreads between the yields on Japanese corporate and government bonds widened dramatically.

    pdf6p taisaocothedung 12-01-2013 53 4   Download

  • By estimating the default jump risk premium, this paper essentially tests the assumptions underlying the conditional diversification hypothesis of JLY (2001). These authors prove that, if default jumps are conditionally independent across firms and if the economy contains an infinite number of bonds, default jump risk cannot be priced. Intuitively, in this case the default jump risk can be fully diversified. Our results indicate that default jumps are not conditionally independent across firms and/or that not enough corporate bonds are traded to fully diversify default jump risk.

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  • Lecture Money and banking - Lecture 12 include all of the following: Sources of risk, idiosyncratic, systematic, reducing risk through diversification, hedging risk, spreading risk, bond and bond pricing.

    pdf20p tangtuy20 28-07-2016 30 2   Download

  • In this chapter, students will be able to understand: Describe various types of risk to which investors are exposed, as well as the sources of return; know how to search for an acceptable investment on the basis of risk, total return, and yield; discuss the merits of investing in common stock and be able to distinguish among the different types of stocks;...

    ppt35p estupendo2 12-08-2016 46 2   Download

  • It is difficult to discern exposures from institutions’ reported credit market posi- tions. Indeed, common data sources such as annual reports and regulatory filings record accounting measures on a large and diverse number of credit market instruments. Ac- counting measures are not necessarily comparable across positions. For example, the economic value of two loans with the same book value but different maturities will react quite differently to changes in interest rates. At the same time, many instruments are close substitutes and thus entail essentially the same market risk.

    pdf101p taisaovanchuavo 23-01-2013 65 9   Download

  • Some affluent investors use municipal bond funds as a source of tax-exempt interest income. Because municipal bond funds tend to have lower before-tax interest yields than those on taxable bonds, this investment is usually appropriate only for people in high tax brackets. Finally, investors may use short-term, high-quality bond funds as an alternative to money market funds.While this strategy can provide higher returns, it does entail the risk that the investor could lose some principal because of fluctuating bond prices....

    pdf41p enter1cai 16-01-2013 38 4   Download

  • We identify and estimate the sources of risk that cause corporate bonds to earn an excess return over default-free bonds. In particular, we estimate the risk premium associated with a default event. Default is modelled using a jump process with stochastic intensity. For a large set of firms, we model the default intensity of each firm as a function of common and firm-specific factors. In the model, corporate bond excess returns can be due to risk premia on factors driving the intensities and due to a risk premium on the default jump risk.

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  • India and Israel have raised over US$35 billion by tapping into the wealth of their diaspora communities. These diaspora bonds represent a stable and cheap source of external finance, often when countries lost access to international capital markets. For diaspora investors, these bonds offer the opportunity to help their country of origin while also providing an investment opportunity. The potential for diaspora bonds is significant for many countries with large diasporas abroad.

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  • Green projects - particularly sustainable energy sources and clean technology - include multiple technologies, at different stages of maturity, and require different types of financing vehicle. Most pension funds are more interested in lower risk investments which provide a steady, inflation adjusted income stream - with green bonds consequently gaining interest as an asset class, particularly - though not only - with the SRI universe of institutional investors.

    pdf0p quaivatdo 19-11-2012 41 5   Download

  • The rapid mortgage credit growth experienced in recent years in mature and emerging countries has raised some stability concerns. Many European credit institutions in mature markets have reacted by increasing securitization, particularly via mortgage covered bonds. From the issuer’s perspective, these instruments have become an attractive funding source and a tool for assetliability management; from the investor’s perspective, covered bonds enjoy a favorable risk-return profile and a very liquid market.

    pdf0p taisaocothedung 12-01-2013 49 2   Download

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