Anticipating Credit Events Using Credit Default Swaps, with An Application to Sovereign Debt Crises /

In reduced-form pricing models, it is usual to assume a fixed recovery rate to obtain the probability of default from credit default swap prices. An alternative credit risk measure is proposed here: the maximum recovery rate compatible with observed prices. The analysis of the recent debt crisis in...

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מחבר ראשי: Chan-Lau, Jorge
פורמט: כתב-עת
שפה:English
יצא לאור: Washington, D.C. : International Monetary Fund, 2003.
סדרה:IMF Working Papers; Working Paper ; No. 2003/106
גישה מקוונת:Full text available on IMF
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245 1 0 |a Anticipating Credit Events Using Credit Default Swaps, with An Application to Sovereign Debt Crises /  |c Jorge Chan-Lau. 
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300 |a 1 online resource (20 pages) 
490 1 |a IMF Working Papers 
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500 |a <strong>On-Campus Access:</strong> No User ID or Password Required 
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520 3 |a In reduced-form pricing models, it is usual to assume a fixed recovery rate to obtain the probability of default from credit default swap prices. An alternative credit risk measure is proposed here: the maximum recovery rate compatible with observed prices. The analysis of the recent debt crisis in Argentina using this methodology shows that the correlation between the maximum recovery rate and implied default probabilities turns negative in advance of the credit event realization. This empirical finding suggests that the maximum recovery rate can be used for constructing early warning indicators of financial distress. 
538 |a Mode of access: Internet 
830 0 |a IMF Working Papers; Working Paper ;  |v No. 2003/106 
856 4 0 |z Full text available on IMF  |u http://elibrary.imf.org/view/journals/001/2003/106/001.2003.issue-106-en.xml  |z IMF e-Library