1.

Record Nr.

UNINA9910464066903321

Autore

Sim̀£ha Manamohana

Titolo

The use (and abuse) of CDS spreads during distress [[electronic resource] /] / prepared by Manmohan Singh and Carolyne Spackman

Pubbl/distr/stampa

[Washington D.C.], : International Monetary Fund, 2009

ISBN

1-4623-8806-X

1-4527-7832-9

1-4518-7209-7

9786612842832

1-282-84283-8

Descrizione fisica

1 online resource (13 p.)

Collana

IMF working paper ; ; WP/09/62

Altri autori (Persone)

SpackmanCarolyne

Disciplina

338.267

Soggetti

Credit derivatives

Derivative securities

Electronic books.

Lingua di pubblicazione

Inglese

Formato

Materiale a stampa

Livello bibliografico

Monografia

Note generali

Description based upon print version of record.

Nota di bibliografia

Includes bibliographical references.

Nota di contenuto

Contents; I. Introduction; II. Recent Distress in Financial Institutions; Figures; 1. Landsbanki; 2. Washington Mutual; 3. Lehman Brothers; III. Policy Implications of Using Stochastic Recovery; Table 1. CDS Settlements Determined Under the ISDA Cash Opt-in Protocol; Box 1. Ecuador ISDA Auction; Appendix I. Recovery Swaps, or Where the Ctd Bonds End Up; References

Sommario/riassunto

Credit Default Swap spreads have been used as a leading indicator of distress. Default probabilities can be extracted from CDS spreads, but during distress it is important to take account of the stochastic nature of recovery value. The recent episodes of Landbanski, WAMU and Lehman illustrate that using the industry-standard fixed recovery rate assumption gives default probabilities that are low relative to those extracted from stochastic recovery value as proxied by the cheapest-to-deliver bonds. Financial institutions using fixed rate recovery assumptions could have a false sense of security