Christos Giannicos, Hany Guirguis & Michael Suen: “The 2008 Financial Crisis and the Dynamics of Price Discovery Among Stock Prices, CDS Spreads, and Bond Spreads for US Financial Firms”, 2012.
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Thursday, April 25, 2013
A PAPER ON CDS & PRICE DISCOVERY
Abstract. This paper examines the dynamics of price discovery among three informationally connected markets: the stock market, the bond market, and the CDS market. The recent financial crisis in the US has provided a perfect natural experiment to study the impact of stress on price discovery. We study daily stock prices, CDS spreads, and bond spreads over a four-year period before and during the crisis (2005-2008) for 10 US financial firms. Before the crisis, the stock market played a dominant role in price discovery. During the crisis, we document a much weaker role of the stock market while the CDS market has taken on a more important role becoming the dominant source of information during the financial crisis.
Christos Giannicos, Hany Guirguis & Michael Suen: “The 2008 Financial Crisis and the Dynamics of Price Discovery Among Stock Prices, CDS Spreads, and Bond Spreads for US Financial Firms”, 2012.
Christos Giannicos, Hany Guirguis & Michael Suen: “The 2008 Financial Crisis and the Dynamics of Price Discovery Among Stock Prices, CDS Spreads, and Bond Spreads for US Financial Firms”, 2012.
MORE ON THE CREDIT CRUNCH IN SPAIN
Based in the small town of Esquivias south of the capital, Guitarras Manuel Rodríguez and Sons turns out more than 5,000 handcrafted flamenco and classical guitars every year, along with a small range of other wooden instruments. Despite the emphasis on tradition and craftsmanship, this is a capital-intensive business. The work floor is dotted with heavy machinery.
Starting a company such as this, says co-owner Manuel Rodríguez, would be almost impossible in Spain’s current economic climate: “If you go to a bank today, no one will give you credit. And even if they gave you credit, they would demand a big deposit and would demand eight or 10 per cent in interest”. Similar complaints can be heard in small and midsized businesses up and down the country, and are raising concern not just within the Spanish government but within the European Central Bank in Frankfurt.
In the five years since the crisis started, no fewer than 450,000 small and medium-sized enterprises have gone under, says Jesús Terciado, the president of Cepyme, the Spanish association. Researchers at Deutsche Bank, meanwhile, point out that last year almost 20 per cent of all loan applications by Spanish SMEs were rejected – twice as many as for large corporations.
Source. Tobias Buck. “Spain threatened by resurgent credit crunch”, Financial Times, 4 April 2013.
Starting a company such as this, says co-owner Manuel Rodríguez, would be almost impossible in Spain’s current economic climate: “If you go to a bank today, no one will give you credit. And even if they gave you credit, they would demand a big deposit and would demand eight or 10 per cent in interest”. Similar complaints can be heard in small and midsized businesses up and down the country, and are raising concern not just within the Spanish government but within the European Central Bank in Frankfurt.
In the five years since the crisis started, no fewer than 450,000 small and medium-sized enterprises have gone under, says Jesús Terciado, the president of Cepyme, the Spanish association. Researchers at Deutsche Bank, meanwhile, point out that last year almost 20 per cent of all loan applications by Spanish SMEs were rejected – twice as many as for large corporations.
Source. Tobias Buck. “Spain threatened by resurgent credit crunch”, Financial Times, 4 April 2013.
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