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Ebook The Delivery Option in Credit Default Swaps

Submitted by wulan on Mon, 03/01/2010 - 08:02

The pace at which the credit derivatives market has been growing since its inception about ten years ago topped all projections1, increasingly calling for the development of more and more accurate pricing tools for these products since market reality often reveals that the assumptions underlying the prevalent models are inadequate and misleading.

The instrument this paper focuses on is a credit default swap (CDS). This is a bilateral contract aimed at transferring the credit risk of a (corporate or sovereign) borrower from one market participant (the protection buyer) to another (the protection seller). The CDS buyer pays a periodical premium for the assurance that the CDS seller will compensate him for the loss in case the borrower defaults during the term of the contract. If so, the protection seller pays the notional amount of the contract to the protection buyer as compensation for the loss incurred. The latter, in turn, must deliver obligations (usually bonds) of the defaulted borrower with total principal equal to the notional amount of the CDS contract.

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The Forgotten King

Submitted by acrobat on Fri, 04/11/2008 - 01:43

The Forgotten King
The Forgotten King is new ebook writen by Jonathan Dunn.

The Forgotten King ebookis a history of the Dark Ages, of the forgotten ages that followed the fall of Rome. Civilization did not collapse with the Roman empire, however, but grew again on an island nation off the coast of Europe. It was called Atilta, a land of ancient forests and great, maritime capitals. At this time, it was at war with itself as its people fought for freedom. Yet the freedoms they desired were contradictory: some longed to overthrow their tyrannical king, others their tyrannical God. It was a fight of forest against city, and nature against civilization; of man against beast, and beast against God. But whom was the victor? For the island of Atilta is no longer to be found. Yet its history remains, embedded into the myths and legends of an exiled people. This is its story. This is the history of The Forgotten King.

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Ebook Debt Covenants and Accounting Conservatism: Complements or Substitutes?

Submitted by wulan on Fri, 01/22/2010 - 06:10

I examine whether firms with more covenants in their public debt contracts recognize economic losses in earnings in a more timely fashion. Covenants are designed to limit a manager’s ability to take actions leading to bondholder wealth expropriation when a firm approaches financial distress. In particular, covenants are designed to protect bondholders from management opportunistically making unwarranted distributions to shareholders or non-optimal investments (Jensen and Meckling, 1976, Myers, 1977, Smith and Warner, 1979).

However, because covenants typically become binding when accounting performance deteriorates below a pre-specified threshold, they protect bondholders only to the extent that a manager’s discretion to postpone the recognition of economic losses in earnings is limited.

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