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Exploring for the Determinants of Credit Risk in Credit Default Swap Transaction Data

Credit risk has received much attention in the academic literature. The bulk of the work has focused on theoretical valuation issues. There is far less research on the empirical side. Nearly all of the empirical work investigating credit risk has focused on the bond market. The main approach was to explain the determinants and the dynamics of the credit spread, hence the difference between the yield on a bond of a risky counterparty and a government bond. Government and corporate bonds differ in a variety of ways, which makes the credit spread an imperfect proxy for credit risk. Some of the issues are addressed in Duffee (1998).

Pricing Constant Maturity Credit Default Swaps Under Jump Dynamics

Constant Maturity Credit Default Swaps (CMCDS) are similar to the common Credit Default Swap (CDS), offering the investor protection in exchange of a periodically paid spread. In contrast to the CDS spread, which is fixed through out the maturity of the CDS, the spread of a CMCDS is floating and is indexed to a reference CDS with a fixed time to maturity at reset dates. The floating spread is proportional to the constant maturity CDS market spread. The maturity of the CMCDS and of the reference CDS does not have to be the same.

Inflation Derivatives: From Market Model to Foreign Currency Analogy

“Foreign currency analogy” has been the standard technology for modeling inflation-linked derivatives (Barone and Castagna, 1997; Bezooyen et al. 1997; Hughston, 1998; Jarrow and Yildirim, 2003). In this approach, real interest rate, defined as the difference between nominal interest rate and inflation rate, is treated as the interest rate of a foreign currency, while the consumer price index (CPI) is treated as the exchange rate between domestic and the foreign currency.

Financial Connections and Systemic Risk

Understanding the nature of systemic risk is key to understanding the occurrence and propagation of financial crises. The term usually refers to a situation where many (if not all) financial institutions fail as a result of a common shock or a contagion process. Herring and Wachter (2001) and Reinhart and Rogoff (2009) find evidence that a collapse of residential or commercial real estate values is the main cause for system wide failures of financial institutions during many financial crises.

Money Market Derivatives and the Allocation of Liquidity Risk in the Banking Sector

This paper develops an argument for why banks, in addition to trading in the interbank spot market for liquidity, also use hedging contracts in the interbank business. The argument goes as follows: Due to the fact that large banks are involved in many lines of business and have more depositors than small banks, they receive more precise information about future aggregate developments, e. g. aggregate liquidity shortages. This enables large banks to react in advance on upcoming liquidity shocks and buffer their impact on the entire banking sector.

Obesity and Ethnicity

There is no straightforward relationship between obesity and ethnicity, with a complex interplay of factors affecting health in minority ethnic communities in the UK. Apart from Health Survey for England (HSE) data from 2004, there is little nationally representative data on obesity prevalence in adults from minority ethnic groups in the UK. Data are scarce or non-existent for many smaller ethnic groups and only a few qualitative studies have focused on these communities.

Sex differences in obesity rates in poor countries: Evidence from South Africa

Globally, men and women face markedly different risks of obesity. In all but of handful of (primarily Western European) countries, obesity is much more prevalent among women than men. We examine several potential explanations for this phenomenon. We analyze differences between men and women in reports and effects of potential underlying causes of obesity—childhood and adult poverty, depression, and attitudes about obesity.

Obesity Relapse In Women

Obesity and relapse after dieting pose a significant threat to an increasing number of adults in this country. Resistance to treatment and high relapse rates make this problem frustrating for patients and practitioners. There is limited research on relapse causation; research on social and life circumstance factors is uncommon. Given the limitations of existing research, the purpose of this study was to investigate the natural course of obesity relapse.

An Integrated Structural Model for Portfolio Market and Credit Risk

The Gaussian asymptotic single factor model (ASFM) of portfolio credit losses, developed by Vasicek (1987), Finger (1999), Schönbucher (2000), Gordy (2003) and others, provides an approximation for the default rate distribution for a credit portfolio in which default dependence is driven by a single common factor. In a large portfolio of credits, idiosyncratic risk is fully diversified and the only source of portfolio loss uncertainty is the default rate that is driven by the common latent Gaussian factor.

Financial Flexibility, Bank Capital Flows, and Asset Prices

Why is a well-developed fi nancial sector important and what eff ect does it have on the risk in an economy? According to the development literature, financial development leads to economic growth because it allows intermediaries to carry out tasks such as reducing investment costs or pooling capital more efficiently. However, in this view of financial development there is no channel for intermediaries either to avert or to create systemic risk. By contrast, in the banking literature, the fundamental role of intermediaries is to transform risk. Specifically, intermediaries have the expertise to reallocate investment capital, and so they provide a link between capital owners and entrepreneurs, allowing both to achieve the optimal mix of risk and returns.

Asset Prices, Financial Conditions, and the Transmission of Monetary Policy

A Monetary Conditions Index (MCI), a weighted average of the short-term interest rate and the exchange rate, has commonly been used, at least in open economies, as a composite measure of the stance of monetary policy. The MCI concept was based on empirical findings that inflationary pressures are determined by excess aggregate demand and that monetary policy mainly affects aggregate demand via its leverage over short-term interest rates and the real exchange rate.

On the Performance of Private Equity Investments: Does Market Timing matter?

Private equity plays an essential role for financing innovative companies and business sectors in the economy. These funds not only constitute an important source of financial funding but also represent a key monitoring device for young growth companies. Although research interest in private equity has increased remarkably during the last years, little is still known about the performance characteristics of private equity as an asset class. This paper attempts to fill this gap.

Risk-Adjusted Performance of Private Equity Investments

Interest and investment in the Private Equity (PE) asset class has grown exponentially in recent years. Advocates of the industry argue that it offers superior risk-adjusted returns compared to public market securities. Testing this theory has thus far been difficult, as we are missing both an appropriate theory to accurately describe the asset class, as well as sufficiently comprehensive data regarding PE transactions. In terms of the first constraint, certain characteristics of the segment distinguish it from the public market sector described in the prevailing capital market theory, including its illiquidity, lack of homogeneity and information asymmetry.

The Dynamics of International Equity Market Expectations

The theory of international finance is based on differences between the residents of different countries in opportunity sets, tastes, and information. Such differences may lead to systematic differences between the portfolios held by investors in different countries,as well as to different trading behavior. Differences in opportunity sets may arise because of cross border frictions and barriers such as taxes and capital controls (Black (1974), Stulz (1981)).

Risk and Expected Returns of Private Equity Investments: Evidence Based on Market Prices

Private equity (PE) refers to equity securities in private companies that are not publicly traded. Private equity funds that specialize in PE investments opened up this asset class to institutional investors and other capital market participants. The early successes of some large PE funds led to a rapid growth of this asset class. Capital commitment to private equity in the U.S. has grown rapidly from around $20 billion in 1990 to over $496 billion in 2007.

Communicating Healthy Eating To Adolescents

This study explores perceptions of healthy/unhealthy eating, and perceptions of various socializing agents encouraging healthy eating, amongst Chinese adolescents. A survey was conducted of 152 seven, eighth and ninth grade Hong Kong students. Results showed that respondents frequently ate out with friends and frequently consumed a range of relatively unhealthy food (candies, chips, and soft drinks). They perceived that a balanced diet and eating at a regular time were the most important attributes of healthy eating.

A Diet for Healthy Bones

This lesson will describe osteoporosis and discuss how to maintain healthy bones through all stages of life. Participants will learn about the risk factors for osteoporosis, as well as ways to improve bone health. Emphasis is on including calcium and vitamin D-rich foods as part of a balanced diet.

Healthy Eating and Depression

Most people are aware that a healthy diet is vital in order to reduce the risk of heart disease, diabetes, obesity and other common physical problems. Recent evidence also suggests that good nutrition may be just as important for our mental health and that a number of conditions, including depression, may be infl uenced by dietary factors.

Capital Flows and Exchange Rates: An Empirical Analysis

Explaining movements of nominal exchange rates is perhaps one of the most intriguing themes in international macroeconomics. This paper investigates the empirical relationship between capital flows and nominal exchange rates. This relation is often stressed as important—Dornbush (1976, p. 1166), for example, states that ‘the exchange rate adjusts instantaneously to clear the asset market’—but the available empirical evidence on such a link is scarce.

Money Demand and Equity Markets

The money demand literature has a long and checkered history. The breakdown of previously stable relationships has led to re-specification of models throughout the post-war period. Notable examples are the “case of the missing money” in the 1970s and the under-prediction of money in the 1980s. Nevertheless, policy makers continue to pay attention to monetary aggregates and the charter of the European Central Bank lists money as one of the pillars of its monetary policy.

Dynamic Relations between International Equity and Currency Markets: The Role of Currency Order Flow

In a recent BusinessWeek article entitled “The Currency Game Has Brand-New Rules,” it was noted that a quarter-point increase in the Eurozone interest rate by the European Central Bank defied convention when the euro declined against the dollar. However, the announcement of the $183 billion takeover of Germany’s Mannesmann by the British mobile phone giant Vodafone AirTouch PLC caused the euro to increase by 2.5 cents against the dollar.

Publishing Concurrent Requests with XML Publisher

XML Publisher enables customers to utilize a set of familiar desktop tools to create and maintain their own report formats based on XML data extracts from their existing Oracle Applications concurrent request programs. At runtime, XML Publisher merges the custom templates with the concurrent request data extracts to generate output in PDF, HTML, RTF, EXCEL (HTML), or even text for use with EFT and EDI transmissions.

Globalwarming: The Psychology of Long Term Risk

Beyond its objective basis in natural science, understanding, discussion, and resolution of the policy issue labeled “global warming” also depends on the way it is framed by various groups (Haas, 1992), and ultimately, viewed by members of the general public. Accordingly, there are several prisms, not entirely independent, through which to consider the global warming problem.

Asset Pricing in Production Economies with Extrapolative Expectations

It is well known that production-based models face a greater challenge in explaining the fluctuations in asset returns due to endogenous consumption and dividend smoothing. Researchers have long realized that relaxing the assumption of perfect rationality is a potential way to explain patterns observed in both macroeconomic and financial time series. Recently, Fuster, Laibson, and Mendel (2011) argue that quasirational models deserve greater attention.

Risk and Return in Bond, Currency and Equity Markets

An extensive list of financial puzzles commonly includes the level and volatilities of the nominal yields, failure of the expectations hypothesis in bond and foreign exchange markets (see Fama, 1984; Campbell and Shiller, 1991), exchange rate volatility, and the risk premium and stock-price volatility puzzles in equity markets.

Financial Liberalization and Financial Fragility

In the last three decades several developed and developing countries have moved towards liberalization of their financial system. Countries eased or lifted bank interest rate ceilings, lowered compulsory reserve requirements and entry barriers, reduced government interference in credit allocation decisions, and privatized many banks and insurance companies. Also, some countries actively promoted the development of local stock markets, and encouraged entry of foreign financial intermediaries.

Financial Intermediary Development and Growth Volatility: Do Intermediaries Dampen or Magnify Shocks?

Do economies with higher levels of financial intermediary development experience more or less volatility in economic growth rates? Do intermediaries dampen the impact of external shocks on the economy or do they amplify them through the credit channel? While the recent empirical and theoretical literature has established a positive impact of financial sector development on economic growth, the potential links between financial development and the volatility of economic growth have not been studied thoroughly yet. Still, the high growth volatility that many developing countries experience has brought to the forefront the question whether and to what extent output fluctuations can be related to the development of the financial sector.

Stock Recommendations and Capital Market Evaluation of Meeting or Missing Earnings Expectations

Analysts’ earnings forecasts serve as an important benchmark for investors in evaluating firm performance (Brown 2001, Brown and Caylor 2005). It is well known that stock returns are significantly related to contemporaneous earnings forecast errors and future forecast revisions. Recent evidence also suggests that the mere act of beating (missing) analyst forecasts evokes a favorable (unfavorable) market response at the time of the earnings announcement after controlling for the magnitude of the forecast error (Lopez and Rees 2002, Bartov, Givoly, and Hayn 2002).

Aggregate Earnings and Asset Prices

In the absence of frictions, asset prices are discounted expected cash flows, therefore unexpected variation in asset prices is due to variation in either expected returns (discount rates) or expected future cash flows. The stock-price volatility literature generally finds that cash-flow variation is primarily idiosyncratic, diversifiable, and does not affect aggregate stock prices. Specifically, these studies find that aggregate discount rates cause most of the variation in aggregate prices (e.g., Campbell and Shiller, 1988a, 1988b; Campbell, 1991; and Campbell and Ammer, 1993).

Inflation Risk and Optimal Monetary Policy

Significant progress has been made in adapting modern macroeconomic models for use in policy analysis. Monetary economists have recently focused on determining the optimal monetary policy in New Keynesian models. This paper shows that optimal monetary policy in New Keynesian models produces a great deal of uncertainty about inflation at medium to long horizons.

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