What did the credit market expect of Argentia default?: evidence from default swap data
Division of Research & Statistics and Monetary Affairs, Federal Reserve Board, 2003 - Business & Economics - 43 pages
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1-year contract 10-year default swap 10-year interest rate 10-year Treasury yield absolute pricing errors Argentina Default Argentine credit Argentine sovereign debt Bakshi basis points Brian Sack CDS seller characteristic function credit default swap credit derivatives credit event credit market credit spread crisis period default likelihood default swap contracts default swap data default swap model default swap premium default swap prices default swap seller density Duffee economic empirical Federal Reserve Board ﬁnancial ﬁrst ﬁts hazard rate in-sample index for Argentina interest rate swap JP Morgan Chase JP Morgan EMBI market expectations market in downgrading mean absolute pricing mean-reversion median pricing errors Moody’s name-speciﬁc distress factor Nobs normal period out-of-sample pricing errors parameter estimates percentage pricing errors physical and risk-neutral physical default probabilities pricing performance quasi-maximum likelihood risk-neutral default probabilities sample period signiﬁcant structure of interest swap valuation swaps on Argentine term premium three sub-periods transition period variables variance-covariance matrix