The Estimation of Liquidity Spread between CDS and Bond - the Application of BGM(1997) Model
| Autor: | Heng-Yu Kuo, 郭恆妤 |
|---|---|
| Rok vydání: | 2008 |
| Druh dokumentu: | 學位論文 ; thesis |
| Popis: | 96 Formerly, we evaluate bond by bond spread which represent investors assume credit risk and is substituted for CDS. But Longstaff, Mithal, and Neis(2005) find the non-default component in bonds to be significant and Chen, Cheng, and Wu(2005) find significant liquidity premium in CDS quotes. Therefore, we evaluate and analyse thirty corporate bonds and try to find liquidity risk imply in CDS spread. In this paper, we use Brace, Gatarek,and Musiela ( 1997) model setting to construct the structure of interest rates and join the CDS concept to discount future cash flow of corporate bonds. When theory price was equal to actual price, we can estimate liquidity spread by two way approach. The conclusion is that when we regard CDS spread as credit spread of bond, the congenial level bond is easier than the investment level bond to underestimate the theory price; when we regard CDS spread as credit spread of bond and liquidity spread of CDS, discover the credit spread is still the important attribute in CDS spread, and accounts for the enormous proportion. |
| Databáze: | Networked Digital Library of Theses & Dissertations |
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