|
|
The role of credit default swaps during the subprime mortgage crisis in 2007-2009
Lazukićová, Andrea ; Teplý, Petr (advisor) ; Vozková, Karolína (referee)
This thesis focuses on the role of credit default swaps during the subprime mortgage crisis 2007-2009 with special focus on mortgage-backed securities. In the empirical part of the thesis, three models are constructed. All of them have the same dependent variable, a mortgage delinquency rate in the 2005-2010 period, and independent variables representing various types of credit default swaps issued. Streamlined in each model, credit default swaps (CDS) were divided based on certain criteria (underlying sectors, maturity and ranking) and subsequently compared and analysed. By using the probit model, the main research question "How the probability of mortgage delinquency depends on the volume of credit default swaps issued?" was inspected. The contribution of this thesis is three-fold. First, we show that a delinquency rate of mortgages was correlated with the maturity of CDS issued (the delinquency rate was higher for short-term loans). Second, we state that the volume of subprime loans increased along with the volume of issued CDS, what contradicts to the insurance nature of a CDS. Finally, a mortgage delinquency rate was lower in the 2006-2008 period than in 2009-2011, what implies the domino effect of failing mortgages had an immense impact even after the global crisis.
|
|
|
The role of credit default swaps during the subprime mortgage crisis in 2007-2009
Lazukićová, Andrea ; Teplý, Petr (advisor) ; Vozková, Karolína (referee)
This thesis focuses on the role of credit default swaps during the subprime mortgage crisis 2007-2009 with special focus on mortgage-backed securities. In the empirical part of the thesis, three models are constructed. All of them have the same dependent variable, a mortgage delinquency rate in the 2005-2010 period, and independent variables representing various types of credit default swaps issued. Streamlined in each model, credit default swaps (CDS) were divided based on certain criteria (underlying sectors, maturity and ranking) and subsequently compared and analysed. By using the probit model, the main research question "How the probability of mortgage delinquency depends on the volume of credit default swaps issued?" was inspected. The contribution of this thesis is three-fold. First, we show that a delinquency rate of mortgages was correlated with the maturity of CDS issued (the delinquency rate was higher for short-term loans). Second, we state that the volume of subprime loans increased along with the volume of issued CDS, what contradicts to the insurance nature of a CDS. Finally, a mortgage delinquency rate was lower in the 2006-2008 period than in 2009-2011, what implies the domino effect of failing mortgages had an immense impact even after the global crisis.
|
|
|
Pricing of bonds and credit default swaps: Evidence from a panel of European companies
Smotlachová, Eva ; Baruník, Jozef (advisor) ; Malinská, Barbora (referee)
The aim of the thesis is to investigate determinants of corporate bond and CDS contract pricing using a sample of 34 European companies over the period 2008-2014. This work extends existing literature by studying differences in determinants of bond and CDS spreads not only for different time periods, but also for different sets of companies grouped by geography, industry, and profitability. The results reveal that bond and CDS spreads are generally influenced by similar factors, with a company's credit rating being the most influential factor. Nevertheless, the investigation of time-specific estimations suggests that firm-specific factors play a more significant role in pricing bonds, whereas market factors have a higher impact on CDS spreads. The analysis of the subsamples reveals substantial differences in regression results for individual groups of companies, which suggests a presence of idiosyncratic factors. Our conclusion is that the pricing of bonds and CDS contracts is not only time-dependent, but also unique for different groups of companies, which implies a necessity to use different pricing models for individual contracts.
|
|
|
Government debt policy: modern approach through derivatives and alternative bonds
Čavojec, Ján ; Dědek, Oldřich (advisor) ; Serdarevič, Goran (referee)
This master thesis discusses alternative debt management instruments - GDP-linked bonds. It provides concise characterization of sovereign debt management. Additionally, it discusses traditional derivatives, such as futures, swaps and bonds, from the government's point of view. The main goal of the thesis is to verify whether GDP-linked bonds are suitable for the Czech and Slovak debt management. Ergo, the bonds could smooth the cost of serving the debt. Furthermore, it describes the development of the sovereign debt and risk premium of the government bonds of the Czech and Slovak republics. It tries to find out whether the risk premium of Slovak bonds differed after introduction of euro. Additionally, the thesis analyzes the effect of various country specific variables on the development of the risk premium. The last but not least goal is to support or reject the hypothesis whether the GDP-linked bonds should be appealing to European economic and monetary union as the members has to satisfied Stability and Growth Pact requirements. The conclusion of the thesis is that the hypothesis of positive effect of the GDP-linked bonds on the cost of serving debt is partly rejected in case of the Czech and Slovak republics as well as in the case of European economic and monetary union. Furthermore, the risk...
|
|
|
Intraday Dynamics of Euro Area Sovereign Credit Risk Contagion
Komárek, Luboš ; Ters, Kristyna ; Urban, Jörg
We examine the role of the CDS and bond markets during and before the recent euro area sovereign debt crisis as transmission channels for credit risk contagion between sovereign entities. We analyse an intraday dataset for GIIPS countries as well as Germany, France and central European countries. Our findings suggest that, prior to the crisis, the CDS and bond markets were similarly important in the transmission of financial shock contagion, but that the importance of the bond market waned during the crisis. We find flight-to-safety effects during the crisis in the German bond market that are not present in the pre-crisis sample. Our estimated sovereign risk contagion was greater during the crisis, with an average timeline of one to two hours in GIIPS countries. By using an exogenous macroeconomic news shock, we can show that, during the crisis period, increased credit risk was not related to economic fundamentals. Further, we find that central European countries were not affected by sovereign credit risk contagion, independent of their debt level and currency.
Fulltext:  PDF
|
|
|
Short-Term Determinants of the Idiosyncratic Sovereign Risk Premium: A Regime-Dependent Analysis for European Credit Default Swaps
Calice, Giovanni ; Miao, RongHui ; Štěrba, Filip ; Vašíček, Bořek
This study investigates the dynamic behavior of the sovereign CDS term premium for a group of European countries. The CDS term premium can be regarded as a forward- looking measure of idiosyncratic sovereign default risk as perceived by financial markets in real time. Using a Markov-switching unobserved component model, we decompose the daily CDS term premium into two unobserved components of statistically different nature (stationary and nonstationary) and study the determinants of their short-term dynamics. Specifically, we link these components in a vector autoregression to various daily observed financial market variables. We find that decomposition into the two components is vital for understanding the short-term dynamics of the entire CDS term premium. The strongest impacts can be attributed to CDS market liquidity, local stock returns, and overall risk aversion. By contrast, the impact of shocks from the sovereign bond market is rather muted. Therefore, the CDS market microstructure effect and investor sentiment play the main roles in sovereign risk evaluation in real time. Moreover, our results suggest that the response of the CDS term premium to shocks to financial variables is regime-dependent and can be ten times stronger during periods of high volatility.
Fulltext: PDF
|
|
|
Mortgage crisis in the USA and Europe and impact of ABS, MBS and GSE on the crisis
Malakjan, Stiv ; Brada, Jaroslav (advisor) ; Osička, Štěpán (referee)
This thesis charts the evolution of US Housing financial system and housing market. The goal is to create a complex picture about wider circumstances and causes of the mortgage crisis. The first part describes the history of US mortgage market and institutions that operate on the market. The second part focuses on the securitization and entities that are in this process participating. It also explores the connections between individual participants. Thirt charter looks at the causes and entities that caused the mortgage market meltdown and examines thein motivation. The final part looks at the situation that occured after the bubble burst. Explores the trend of future regulation and mortgage market evolution.
|
|
|
Public debt and capital market in Czech Republic
Lošková, Žaneta ; Vítek, Leoš (advisor) ; Pavel, Jan (referee)
The Bachelor thesis deals with the public debt. It describes the basic features of government bonds and treasury bills and their primary issue. It investigates the basic principles of sovereign debt management in the world and examines in detail the process of debt management and risk management in the Czech Republic. The analytical part examines instruments in terms of yield and demand. It evaluates the development of trade volume in the bond market in recent years and about which instruments are most in demand in the market. Finally, examines the risks associated with debt instruments through the CDS.
|
guest ::
