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Cover Art
Author Chan-Lau, Jorge A.

Title Anticipating Credit Events Using Credit Default Swaps, with An Application to Sovereign Debt Crises [electronic resource] / Jorge A Chan-Lau.

Published Washington, D.C. : International Monetary Fund, 2003.


Location Call No. Status
Physical description 1 online resource (20 p.)
Series IMF Working Papers; Working Paper ; No. 03/106
IMF Working Papers; Working Paper ; No. 03/106
Summary 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.
Notes Description based on print version record.
Other author Chan-Lau, Jorge A.
Subject Bond
Credit Default Swaps
Credit Defaults Swaps
Credit Derivatives
Default Probability
ISBN 1451852916 : 15.00 USD
ISSN 1018-5941
Standard Number 10.5089/9781451852912.001