Liquidity risk premia : an empirical analysis of european corporate bond yields
Autor(a) principal: | |
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Data de Publicação: | 2011 |
Outros Autores: | |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10400.5/10083 |
Resumo: | In this study we highlight the importance of liquidity risk, especially in periods of market stress, and advocate in favour of an explicit consideration of a liquidity premium when using mark-to-model methodologies to value financial assets. For European corporate bonds, we show that the liquidity premium, calculated as the difference between the yield spread of corporate bonds and the spread of credit default swaps, grew significantly during the recent market turmoil not only in absolute terms but also in relative terms. Although liquidity premiums were far from stable during the time frame of analysis-from 1 January 2005 to 31 December 2009 - on average roughly 40% of corporate yield spreads can be interpreted in terms of liquidity premia. We propose direct matching between the CDS and the underlying reference assets when computing liquidity premia. This differs from what seems to be the industry standard, which is simply to use indices when trying to infer market implied liquidity premia. Although computationally more demanding, the method we use is sounder from a theoretical point of view and produces richer results and analysis. With this method we are able present an analysis of liquidity risk premia per sector of activity. |
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Liquidity risk premia : an empirical analysis of european corporate bond yieldsLiquidity PremiumCredit RiskYield Corporate SpreadCDS Spread.In this study we highlight the importance of liquidity risk, especially in periods of market stress, and advocate in favour of an explicit consideration of a liquidity premium when using mark-to-model methodologies to value financial assets. For European corporate bonds, we show that the liquidity premium, calculated as the difference between the yield spread of corporate bonds and the spread of credit default swaps, grew significantly during the recent market turmoil not only in absolute terms but also in relative terms. Although liquidity premiums were far from stable during the time frame of analysis-from 1 January 2005 to 31 December 2009 - on average roughly 40% of corporate yield spreads can be interpreted in terms of liquidity premia. We propose direct matching between the CDS and the underlying reference assets when computing liquidity premia. This differs from what seems to be the industry standard, which is simply to use indices when trying to infer market implied liquidity premia. Although computationally more demanding, the method we use is sounder from a theoretical point of view and produces richer results and analysis. With this method we are able present an analysis of liquidity risk premia per sector of activity.Instituto Superior de Economia e GestãoRepositório da Universidade de LisboaGaspar, Raquel M.Pereira, Patrícia2015-11-06T15:07:35Z20112011-01-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10400.5/10083engGaspar, Raquel M. e Patrícia Pereira (2011). "Liquidity risk premia : an empirical analysis of european corporate bond yields". Portuguese Journal of Management Studies, XVI(2):131-152info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-03-06T14:40:27Zoai:www.repository.utl.pt:10400.5/10083Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T16:56:35.896125Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
Liquidity risk premia : an empirical analysis of european corporate bond yields |
title |
Liquidity risk premia : an empirical analysis of european corporate bond yields |
spellingShingle |
Liquidity risk premia : an empirical analysis of european corporate bond yields Gaspar, Raquel M. Liquidity Premium Credit Risk Yield Corporate Spread CDS Spread. |
title_short |
Liquidity risk premia : an empirical analysis of european corporate bond yields |
title_full |
Liquidity risk premia : an empirical analysis of european corporate bond yields |
title_fullStr |
Liquidity risk premia : an empirical analysis of european corporate bond yields |
title_full_unstemmed |
Liquidity risk premia : an empirical analysis of european corporate bond yields |
title_sort |
Liquidity risk premia : an empirical analysis of european corporate bond yields |
author |
Gaspar, Raquel M. |
author_facet |
Gaspar, Raquel M. Pereira, Patrícia |
author_role |
author |
author2 |
Pereira, Patrícia |
author2_role |
author |
dc.contributor.none.fl_str_mv |
Repositório da Universidade de Lisboa |
dc.contributor.author.fl_str_mv |
Gaspar, Raquel M. Pereira, Patrícia |
dc.subject.por.fl_str_mv |
Liquidity Premium Credit Risk Yield Corporate Spread CDS Spread. |
topic |
Liquidity Premium Credit Risk Yield Corporate Spread CDS Spread. |
description |
In this study we highlight the importance of liquidity risk, especially in periods of market stress, and advocate in favour of an explicit consideration of a liquidity premium when using mark-to-model methodologies to value financial assets. For European corporate bonds, we show that the liquidity premium, calculated as the difference between the yield spread of corporate bonds and the spread of credit default swaps, grew significantly during the recent market turmoil not only in absolute terms but also in relative terms. Although liquidity premiums were far from stable during the time frame of analysis-from 1 January 2005 to 31 December 2009 - on average roughly 40% of corporate yield spreads can be interpreted in terms of liquidity premia. We propose direct matching between the CDS and the underlying reference assets when computing liquidity premia. This differs from what seems to be the industry standard, which is simply to use indices when trying to infer market implied liquidity premia. Although computationally more demanding, the method we use is sounder from a theoretical point of view and produces richer results and analysis. With this method we are able present an analysis of liquidity risk premia per sector of activity. |
publishDate |
2011 |
dc.date.none.fl_str_mv |
2011 2011-01-01T00:00:00Z 2015-11-06T15:07:35Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10400.5/10083 |
url |
http://hdl.handle.net/10400.5/10083 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
Gaspar, Raquel M. e Patrícia Pereira (2011). "Liquidity risk premia : an empirical analysis of european corporate bond yields". Portuguese Journal of Management Studies, XVI(2):131-152 |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.publisher.none.fl_str_mv |
Instituto Superior de Economia e Gestão |
publisher.none.fl_str_mv |
Instituto Superior de Economia e Gestão |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
instname_str |
Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
instacron_str |
RCAAP |
institution |
RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
collection |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
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Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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1799131048713388032 |