Quotation Frey, Rüdiger. 2018. Sovereign-Bond Backed Securities as a new Safe Asset for the Eurozone: a Dynamic Credit Risk Perspective. 10th World Congress of the Bachelier Finance Society, Dublin, Irland, 16.07.-20.07.


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Abstract

We carry out a detailed quantitative analysis for synthetic securities backed by diversified portfolios of European sovereign bonds (socalled SBSs). Such securities have recently received a lot of interest as a tool to improving the functioning of the euro area. For this we popose a reduced-form credit risk model with common Markov modulated mean-reversion level that captures the co-movement of credit spreads. We carry out an empirical analysis of this model and derive analytical pricing formulas. Moreover, we study the robustness of SBSs and the impact of defaults and regime switches on the volatility of SBSs.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Paper presented at an academic conference or symposium
Language English
Title Sovereign-Bond Backed Securities as a new Safe Asset for the Eurozone: a Dynamic Credit Risk Perspective
Event 10th World Congress of the Bachelier Finance Society
Year 2018
Date 16.07.-20.07.
Country Ireland
Location Dublin

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People
Frey, Rüdiger (Details)
Organization
Institute for Statistics and Mathematics IN (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
1118 Probability theory (Details)
1137 Financial mathematics (Details)
5361 Financial management (Details)
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