Archive for the ‘Special Reports’ Category

When sharing risk actually increases risk

Based on the statements provided, (d) Bankers do not like to share good things and will only share bad things follows. The premises are positive and universal (logically speaking. No actual verification of fact or truth is needed to answer …

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Do CDS spreads lead corporate bankruptcies?

Fitch recently completed a small study entitled “CDS Spreads and Default Risk:  A Leading Indicator?” investigating whether default probabilities implied by credit default swap spreads serve as a good indicator for companies that eventually default.

Fitch went through …

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Template for Contingent CDS being written

Now that financial – and particularly credit – markets have somewhat “normalized” with spreads having tightened in from their 2008-9 highs, financial engineers can re-focus their time to creating new products and services to “better manage risk, express views and …

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China’s Financial Asset Exchanges to add liquidity

China has made great strides in its efforts to modernize its financial markets over the past few months. Beginning with the creation of National Association of Financial Market Institutional Investors (NAFMII) in 2007, introducing  the concept of bond insurance, the …

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Bootstrapping Credit Default Swap Data

Here is a sample site from Wolfram Mathematica demonstrating their method of bootstrapping CDS index data.

Taken from the site:

Bootstrapping is a resampling method that has a wide variety of applications. It can be used to simulate the trajectories

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Credit default swaps on companies without debt

A couple recent reports in the WSJ and Bloomberg shed light on an interesting aspect of the credit default swap markets: CDS on companies without public debt.


WSJ highlights the case of major retailer Gap Inc. saying


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Analysis: What happened to Pershing Square’s BP swaps

An analysis of Pershing Square’s BP CDS trade and BP’s latest financials.

Pershing Square’s latest third quarter investment letter covered a number of past, present and future investments – with one notable exception: BP CDS.

The reason for the …

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China officially begins trading credit risk mitigation tools

It is official. After years and months of preparation and speculation, China has officially introduced their own version of credit default swaps to the domestic market and fulfilled a promise/goal of introducing them by this year and ahead of …

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What kind of swaps does Pimco like?

Think credit default swaps are just the domain of an exclusive set of New York and London hedge funds? Think again. CDS have even entered Newport Beach, California in the public discourse of one of the largest bond mutual fund …

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Municipal Market CDS – ♪ Somebody call 9-1-1…Fire burning in the muni market ♬ (Part 3)

Part 3: The Swaps is continued from Part 2: The Problems

The CDS reaction

According to Otis Casey at Markit in a DerivativesWeek report (before news of the Harrisburg state bailout was known),

“Some market participants have noted that
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