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How can Information on CDS Contracts be Used to Estimate Liquidity Premium in the Bond Market
P. 248–254.
Tarasova P. V.
Liquidity is an important characteristic for any bond, but now in the literature there are no models for estimating the liquidity premium. Moreover, there is not even an exact definition of this notion. There are many facts proving the existence of the liquidity premium in the bond market. One of such fact, for example, is the difference between values of the bond spread and the credit default swap (CDS) premium. Following the Longstaff (2005) study, often, in practice, CDS data are used for the estimation of the pure credit risk of the underlying bond and henc for the separation of the bond risk premium from the liquidity premium and credit risk premium. However, the fact that CDS premium can be used for the pure credit risk measurement is a disputable proposition. The purpose of this paper is to make recommendations on the applicability of such approach for assessing liquidity premium. In this paper the risks associated with CDS transactions will be considered.Also, different approaches for assessing the liquidity bond premium and liquidity CDS premium will be reviewed as well as the correlation of these quantitites. We will see that the CDS premium does not measure the pure credit component of the bond spread.
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I study how (VaR-based) financial constraints affect liquidity and welfare under different structures of the arbitrage industry. When capital is dispersed across competitive arbitrageurs, financial constraints may impair their ability to provide liquidity, lowering other investors' welfare. However, when capital is concentrated among arbitrageurs with market power, introducing constraints can make everyone better off and ...
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Added: March 23, 2024
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Purpose
The study examines the relationship between news intensity, media sentiment and market microstructure invariance-implied measures of trading activity and liquidity of Chinese property developer stocks during the 2020–2022 Chinese property sector crisis.
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Dabrowski M., Dominguez-Jimenez M., / Series Bruegel blog "Bruegel blog". 2020.
Emerging economies have received little attention in the economic debate regarding the COVID-19 pandemic, yet the performance of their primary market indicators, chiefly sovereign debt, foreign exchange and equities, indicate a deep deterioration is taking place. Times of crisis often lead to capital flight from emerging markets as investors seek safe haven assets, while the ...
Added: October 29, 2020
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The bond market is a key securities market and emerging economies present exciting, new investment opportunities. This timely book provides insights into these emerging bond markets through empirical models and analytical databases, i.e. Bloomberg, Eikon Refinitiv and the Russian Cbonds.
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Added: November 1, 2018
Makarova V. A., Skobeleva Inna, , in: Conference Proceedings. 5th International Multidisciplinary Scientific Conference on Social Sciences and Arts SGEM 2018Vol. 5: Finance, economics and tourism. Issue 1.3: Modern science.: Sofia: STEF92 Technology Ltd., 2018. Ch. 118 P. 957–964.
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Added: October 27, 2018