quantfinanceclub.com

(Fuente: Greek PSI: Questions & Answers, BNP Paribas, 22 February 2012)

(Fuente: BNP Paribas. Market Economics. 8 February 2012. Eurozone: Fiscal Update)

FT Alphaville tiene una muy buena serie de posts sobre un método (una subasta) por el cual se obtiene el monto definitivo que paga un CDS (si un evento de default ocurre).

To the extent that CDS are used to hedge, rather than speculate, the outcomes of these auctions will dictate how effective the hedge has been.

In this series, FT Alphaville looks at why the auction process was put in place, how it works, and why it may be biased — while discussing some rather curious cases along the way.

Aquí están los links los tres posts.

1. Why do they exist?
2. A necessary condition for growth
3. Mechanics

A CDS Option Miscellany

CDS options allow investors to express a view on spread volatility and obtain a wider range of payoffs than are possible with vanilla CDS. We give a detailed exposition of different types of single-name CDS option, including options with upfront protection payment, recovery options and recovery swaps, and also presents a new formula for the index option. The emphasis is on using the Black-76 formula where possible and ensuring consistency within asset classes. In the framework shown here the `armageddon event’ does not require special attention.

Link al Paper

Managing Sovereign Credit Risk in Bond Portfolios

Abstract:      
With the recent development of the European debt crisis, traditional index bond management has been severely called into question. We focus here on the risk issues raised by the classical market-capitalization weighting scheme. We propose an approach to properly measure sovereign credit risk in a fixed-income portfolio. For that, we assume that CDS spreads follow a SABR process and we derive a sovereign credit risk measure based on CDS spreads and duration of portfolio bonds. We then consider two alternative weighting methods which are fundamental indexation and risk-based indexation. Fundamental indexation is based on GDP indexation whereas risk-based indexation uses a risk-budgeting approach based on our sovereign credit risk measure. We then compare all these methods in terms of risk, diversification and performance. We show that the risk-budgeting approach is the most appropriate scheme to manage sovereign risk in bond portfolios and gives very appealing results with respect to active management of bond portfolios.

Link al Paper

En el sitio de la Unión Europea, hay un accesible FAQ sobre la regulación sobre Short Selling y Credit Default Swaps.

¿Sesgos + momentum?, maybe.

Personalmente me quedo con la tabla comparativa -cerca del final- entre la regulacion del Short Selling en USA, EU y Hong Kong.