05891oam 22014774 450 991096985040332120250426110532.097866128428329781462388066146238806X978145277832714527783299781451872095145187209797812828428301282842838(CKB)3170000000055233(EBL)1608234(SSID)ssj0000939942(PQKBManifestationID)11596388(PQKBTitleCode)TC0000939942(PQKBWorkID)10937986(PQKB)11101171(OCoLC)518508975(IMF)WPIEE2009062(MiAaPQ)EBC1608234(IMF)WPIEA2009062WPIEA2009062(EXLCZ)99317000000005523320020129d2009 uf 0engur|n|---|||||txtccrThe Use (and Abuse) of CDS Spreads During Distress /Carolyne Spackman, Manmohan Singh1st ed.Washington, D.C. :International Monetary Fund,2009.1 online resource (13 p.)IMF Working PapersDescription based upon print version of record.9781451916447 1451916442 Includes bibliographical references.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; ReferencesCredit 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, and could be faced with outsized losses with potential knock-on effects for other institutions. To ensure effective oversight of financial institutions, and to monitor the stability of the global financial system especially during distress, the stochastic nature of recovery rates needs to be incorporated.IMF Working Papers; Working Paper ;No. 2009/062Credit derivativesDerivative securitiesAsset pricesimfBankruptcyimfBanksimfBondsimfCredit default swapimfCreditimfCurrenciesimfDeflationimfDepository InstitutionsimfEvent StudiesimfFinancial Institutions and Services: Government Policy and RegulationimfFinancial institutionsimfGeneral Financial Markets: General (includes Measurement and Data)imfGovernment and the Monetary SystemimfInflationimfInformation and Market EfficiencyimfInternational Lending and Debt ProblemsimfInvestment & securitiesimfInvestments: BondsimfLiquidationimfMacroeconomicsimfMicro Finance InstitutionsimfMonetary economicsimfMonetary Policy, Central Banking, and the Supply of Money and Credit: GeneralimfMonetary SystemsimfMoney and Monetary PolicyimfMoneyimfMortgagesimfPayment SystemsimfPrice LevelimfPricesimfRegimesimfStandardsimfEcuadorimfCredit derivatives.Derivative securities.Asset pricesBankruptcyBanksBondsCredit default swapCreditCurrenciesDeflationDepository InstitutionsEvent StudiesFinancial Institutions and Services: Government Policy and RegulationFinancial institutionsGeneral Financial Markets: General (includes Measurement and Data)Government and the Monetary SystemInflationInformation and Market EfficiencyInternational Lending and Debt ProblemsInvestment & securitiesInvestments: BondsLiquidationMacroeconomicsMicro Finance InstitutionsMonetary economicsMonetary Policy, Central Banking, and the Supply of Money and Credit: GeneralMonetary SystemsMoney and Monetary PolicyMoneyMortgagesPayment SystemsPrice LevelPricesRegimesStandards338.267Spackman Carolyne1815914Singh Manmohan1815606DcWaIMFBOOK9910969850403321The Use (and Abuse) of CDS Spreads During Distress4371536UNINA