Journal ArticleDOI
Credit spread volatility, bond ratings and the risk reduction effect of watchlistings
TLDR
In this paper, the relationship between the volatility of the credit risk premium of a plain vanilla bond and its credit rating was examined and it was shown that rating changes have a dynamic influence on spread volatilities.Abstract:
This article examines the relationship between the volatility of the credit risk premium of a plain vanilla bond and its credit rating. We calculate volatilities over different time windows and test for differences in the mean volatility depending on the bond rating. We check for the influence of further factors that are theoretically relevant for the explanation of the credit spread volatility. Moreover, we check the dynamic effect of rating changes on bond spread volatility. Finally, we test whether credit watchlistings influence credit spread volatility. We confirm prior studies in that, generally, credit ratings rank the risk of bonds according to credit spread volatility. We further find that rating changes have a dynamic influence on spread volatilities. Additionally it is shown that credit watchlistings significantly reduce the volatility. Thus, watchlistings are perceived to offer valuable information. Copyright © 2006 John Wiley & Sons, Ltd.read more
Citations
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Journal ArticleDOI
Sovereign credit ratings, market volatility, and financial gains
TL;DR: The estimation results show that upgrades do not have significant effects on volatility, but downgrades increase stock and bond market volatility, with financial gains decreasing with higher risk aversion.
Journal ArticleDOI
The effect of credit ratings on emerging market volatility
Kyle Bales,Christopher Malikane +1 more
TL;DR: In this article, a write-up is submitted in partial fulfillment of the Master of Management Degree in Finance and Investment (MMI-FI) degree in finance and investment (MEME).
Book ChapterDOI
A Markov Switching Re-evaluation of Event-Study Methodology
Rosella Castellano,Luisa Scaccia +1 more
TL;DR: Since CDSs provide insurance against the default of a particular company or sovereign entity, this study checks if market anticipates reviews for downgrading and evaluates the time period the announcements lag behind the market.
Journal ArticleDOI
Risk mitigation by institutional participants in the secondary market: Evidence from foreign Rule 144A debt market
TL;DR: In this article, the authors study the secondary market trades of debt issues by foreign firms in the U.S. under SEC Rule 144A, a unique market where the counterparties are qualified institutional buyers (QIBs).
Dissertation
Sovereign credit risk spillover
TL;DR: This article examined cross-market correlations between means and variances in sovereign credit markets and captured the presence of any contagion effect by focusing on parallel movements between markets in the wake of the recent crisis.
References
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Journal ArticleDOI
Determinants of Risk Premiums on Corporate Bonds
TL;DR: In this article, the authors present and test a hypothesis about the determinants of risk premiums on corporate bonds, i.e., the difference between the market yield on a bond and the corresponding pure rate of interest.
Journal ArticleDOI
A multivariate analysis of industrial bond ratings
George E. Pinches,Kent A. Mingo +1 more
Journal ArticleDOI
Corporate bond valuation and the term structure of credit spreads
Robert B. Litterman,Thomas Iben +1 more
Journal ArticleDOI
What's in a Bond Rating
TL;DR: The question "What's in a bond rating?" has been asked at least since 1909 when such ratings were started in the United States as discussed by the authors, and most informed persons who answer this question typically admit that ratings depend in part on readily available statistics on a firm's operations and financial condition.
Journal ArticleDOI
Event study concerning international bond price effects of credit rating actions
Manfred Steiner,Volker G. Heinke +1 more
TL;DR: In this article, the authors examined daily excess eurobond returns associated with announcements of watchlistings and rating changes by Standard & Poor's and Moody's and observed significant bond price reactions are observed for announcements of downgradings and negative watch-listings while upgradings and positive watchlistsings do not cause announcement effects.