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Essays on Credit Derivatives and Credit Risk Modeling.

紀錄類型:	書目-電子資源 : Monograph/item
正題名/作者:	Essays on Credit Derivatives and Credit Risk Modeling./
作者:	Zhao, Ran.
出版者:	Ann Arbor : ProQuest Dissertations & Theses, : 2021,
面頁冊數:	167 p.
附註:	Source: Dissertations Abstracts International, Volume: 83-04, Section: A.
Contained By:	Dissertations Abstracts International83-04A.
標題:	Finance. -
電子資源:	http://pqdd.sinica.edu.tw/twdaoapp/servlet/advanced?query=28713190
ISBN:	9798544246220

Essays on Credit Derivatives and Credit Risk Modeling.
Zhao, Ran.

Essays on Credit Derivatives and Credit Risk Modeling. - Ann Arbor : ProQuest Dissertations & Theses, 2021 - 167 p.

Source: Dissertations Abstracts International, Volume: 83-04, Section: A.

Thesis (Ph.D.)--The Claremont Graduate University, 2021.

This item must not be sold to any third party vendors.

Modeling credit risk becomes increasingly important for the stability of the financial system, under context of constant growth of global fixed-income markets in the past decades. The issuance of corporate debts has a much larger volume than the issuance of equity: the U.S. market total corporate bond issuance is $2.3 trillion versus the stock issuance of $388.7 billion in year 2020. Credit derivatives play a controversial role on the fixed-income market, particularly since the most recent credit crisis in 2007. Credit Default Swap (CDS) facilitates risk-sharing among market participants. Meanwhile, CDS trading alters the credit risk of related firms through corporate financial policies. As for its informativeness, the CDS spread contains substantial information that is related to default risk and other market risks that the underlying firm and its business partners are facing. This dissertation comprises of three chapters. It endeavors to provide innovative models and evidence regarding to credit risk modeling and the role of credit derivatives to better understand and utilize the hidden information that CDS could provide.In the first chapter, I propose a corporate default prediction model with an additional covariate, single-name credit default swap spread. This covariate is added on top of the set of control variables in benchmark models, including a series of equity market performance and firm characteristics. The proposed model with single-name CDS spreads has a better in-sample explanatory property and stronger out-of-sample predictive power, comparing with the benchmark default prediction models. The predictive power improves when I remove the illiquidity and the risk premium components and leave with just the physical default probability. The empirical results are consistent for robustness checks on firm types and market conditions. The research provides a credit market integrated corporate default prediction technique with meaningful implication to the current COVID-19 pandemic shock to the economics. As for the second chapter, I document a puzzling higher (conditional) bond return volatility around the time of default for bonds included in CDS auctions (especially cheapest-to-deliver bonds) versus those that are not, while controlling for firm fundamentals and bond attributes. This finding does not extend to time periods far ahead of default. This bond volatility puzzle could not be explained by the bond illiquidity and CDS market information transmission. There is no significant difference between the idiosyncratic stock return volatility of CDS firms and non-CDS firms around the time of default. These results are more consistent with CDS buyers and sellers manipulating bond prices to achieve favorable CDS auction outcomes, rather than a spillover of price discovery by CDS traders into the stock and bond markets.The third chapter examines the externality effect of customer firm's credit default swap trading on stock return informativeness of the supplier firm. The empirical results of this paper show that firms with high proportion of sales to CDS referenced customers tend to have more firm-specific embedded information in the stock price and thus higher stock price informativeness, which is associated with a lower level of stock return synchronicity. Moreover, I find that this CDS information externality effect is more pronounced for firms with distressed customers and poor information environment. Our empirical results are robust to various measures, model specifications and endogeneity controls. We provide new evidence on CDS trading externality on equity market information environment along the supply chain. That is, the stock price informativeness of firms who are not directly referenced by CDS is also affected through their sales and trades linkage with CDS referenced customers.

ISBN: 9798544246220Subjects--Topical Terms:

542899
Finance.
Subjects--Index Terms:

Asset volatility

Essays on Credit Derivatives and Credit Risk Modeling.
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245 1 0 $a Essays on Credit Derivatives and Credit Risk Modeling.
260 1 $a Ann Arbor : $b ProQuest Dissertations & Theses, $c 2021
300 $a 167 p.
500 $a Source: Dissertations Abstracts International, Volume: 83-04, Section: A.
500 $a Advisor: Schellhorn, Henry;Yu, Fan.
502 $a Thesis (Ph.D.)--The Claremont Graduate University, 2021.
506 $a This item must not be sold to any third party vendors.
520 $a Modeling credit risk becomes increasingly important for the stability of the financial system, under context of constant growth of global fixed-income markets in the past decades. The issuance of corporate debts has a much larger volume than the issuance of equity: the U.S. market total corporate bond issuance is $2.3 trillion versus the stock issuance of $388.7 billion in year 2020. Credit derivatives play a controversial role on the fixed-income market, particularly since the most recent credit crisis in 2007. Credit Default Swap (CDS) facilitates risk-sharing among market participants. Meanwhile, CDS trading alters the credit risk of related firms through corporate financial policies. As for its informativeness, the CDS spread contains substantial information that is related to default risk and other market risks that the underlying firm and its business partners are facing. This dissertation comprises of three chapters. It endeavors to provide innovative models and evidence regarding to credit risk modeling and the role of credit derivatives to better understand and utilize the hidden information that CDS could provide.In the first chapter, I propose a corporate default prediction model with an additional covariate, single-name credit default swap spread. This covariate is added on top of the set of control variables in benchmark models, including a series of equity market performance and firm characteristics. The proposed model with single-name CDS spreads has a better in-sample explanatory property and stronger out-of-sample predictive power, comparing with the benchmark default prediction models. The predictive power improves when I remove the illiquidity and the risk premium components and leave with just the physical default probability. The empirical results are consistent for robustness checks on firm types and market conditions. The research provides a credit market integrated corporate default prediction technique with meaningful implication to the current COVID-19 pandemic shock to the economics. As for the second chapter, I document a puzzling higher (conditional) bond return volatility around the time of default for bonds included in CDS auctions (especially cheapest-to-deliver bonds) versus those that are not, while controlling for firm fundamentals and bond attributes. This finding does not extend to time periods far ahead of default. This bond volatility puzzle could not be explained by the bond illiquidity and CDS market information transmission. There is no significant difference between the idiosyncratic stock return volatility of CDS firms and non-CDS firms around the time of default. These results are more consistent with CDS buyers and sellers manipulating bond prices to achieve favorable CDS auction outcomes, rather than a spillover of price discovery by CDS traders into the stock and bond markets.The third chapter examines the externality effect of customer firm's credit default swap trading on stock return informativeness of the supplier firm. The empirical results of this paper show that firms with high proportion of sales to CDS referenced customers tend to have more firm-specific embedded information in the stock price and thus higher stock price informativeness, which is associated with a lower level of stock return synchronicity. Moreover, I find that this CDS information externality effect is more pronounced for firms with distressed customers and poor information environment. Our empirical results are robust to various measures, model specifications and endogeneity controls. We provide new evidence on CDS trading externality on equity market information environment along the supply chain. That is, the stock price informativeness of firms who are not directly referenced by CDS is also affected through their sales and trades linkage with CDS referenced customers.
590 $a School code: 0047.
650 4 $a Finance. $3 542899
650 4 $a Investments. $3 566987
650 4 $a Yield curve. $3 3682555
653 $a Asset volatility
653 $a Bankruptcy
653 $a CDS auction
653 $a Credit derivatives
653 $a Credit risk
653 $a Supply chain externality
690 $a 0508
690 $a 0501
710 2 $a The Claremont Graduate University. $b Peter F. Drucker and Masatoshi Ito Graduate School of Management. $3 1677609
773 0 $t Dissertations Abstracts International $g 83-04A.
790 $a 0047
791 $a Ph.D.
792 $a 2021
793 $a English
856 4 0 $u http://pqdd.sinica.edu.tw/twdaoapp/servlet/advanced?query=28713190