Extreme Risks During the U.S. Financial Crisis: An Empirical Study of the Credit Default Swap Market
0
조회
0
다운로드
0
인용
0
참고문헌
키워드
초록
This article focuses on the many extreme credit default swap spread movements observed during the recent U.S. credit crisis. The tails of the spread (and price) change distribution differ significantly from those of the normal distribution even for diversified credit derivatives portfolios. Particular focus is placed on the sudden shift in the behavior of the credit default swap market in the summer of 2007. During the first month of the crisis, July 2007, the extreme turbulence in the credit derivatives market is comparable only to the turmoil in the equity market in October 1987 and in October 2008. As a result of this extreme behavior and the dramatic regime shift observed at the start of the crisis, the credit derivatives portfolio Value at Risk estimates based on extreme value theory are more accurate than those based on the normal-, the Student’s t-, or the historical distribution. Similar results appear during the crisis and in the comparably tranquil years leading up to the crisis. The results are qualitatively the same for investment-grade and high-yield credits.
Abstract
This article focuses on the many extreme credit default swap spread movements observed during the recent U.S. credit crisis. The tails of the spread (and price) change distribution differ significantly from those of the normal distribution even for diversified credit derivatives portfolios. Particular focus is placed on the sudden shift in the behavior of the credit default swap market in the summer of 2007. During the first month of the crisis, July 2007, the extreme turbulence in the credit derivatives market is comparable only to the turmoil in the equity market in October 1987 and in October 2008. As a result of this extreme behavior and the dramatic regime shift observed at the start of the crisis, the credit derivatives portfolio Value at Risk estimates based on extreme value theory are more accurate than those based on the normal-, the Student’s t-, or the historical distribution. Similar results appear during the crisis and in the comparably tranquil years leading up to the crisis. The results are qualitatively the same for investment-grade and high-yield credits.
참고문헌 (13)
- Balkema, A., "Residual life time at great age", Annals of Probability, 2, pp.792~804 (1974)
- Byström, H., "Back to the future : futures margins in a future credit default swap index futures market", The Journal of Futures Markets, 27, pp.85~104 (2007)
- Byström, H., "Credit risk -- models, derivatives, and management – financial mathematics", pp.69~83 (2008), Chapman & Hall
- Embrechts, P., "Modeling extremal events" (1997), Springer
- Eurex, "Portfolio overlay strategy using Eurex iTraxx credit futures - introducing more options in European fund management. Case study, Eurex Frankfurt AG", ~ (2007)
- Fisher, R., "Limiting forms of the frequency distribution of the largest or smallest member of a sample", Proceedings of the Cambridge Philosophical Society (1928)
- iTraxx futures contract - structure and evaluation. Report, "Gisdakis, P.", UniCredit, ~ (2007)
- Gnedenko, B., "Sur la distribution limite du terme maximum d’une serie aleatoire", Annals of Mathematics, 44, pp.423~453 (1943)
- Gumbel, E., "Statistics of extremes" (1958), Columbia University Press
- McNeil, A., "Estimation of tail-related risk measures for heteroscedastic financial time series: An extreme value approach", Journal of Empirical Finance, 7, pp.271~300 (2000)
- Pickands, J., "Statistical inference using extreme order statistics", The Annals of Statistics, 3, pp.119~131 (1975)
- Rajan, A., "The structured credit handbook" (2007), Wiley
- Reiss, R., "Statistical analysis of extreme values" (1997), Birkhäuser