FT Alphaville tiene un buen post sobre la actualidad del mercado de CDS (soberanos). Ofrece gráficos interesantes y una respuesta a la pregunta: ¿Que es el Quanto Spread y por qué existe?
The difference between the USD CDS spread and EUR CDS spread is referred to as the Quanto spread.
Desde Canada, Nick Rowe tiene un interesante post sobre como las hipotecas a 30 años a tasa fija en Estados Unidos no tienen razon de ser. Tanto desde el que la pide, como del que la ofrece (bancos).
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First off, American 30-year fixed rate mortgages aren’t 30-year and aren’t fixed rate. The term is variable, and the rate is variable. That’s because they are “open” mortgages, rather than “closed” mortgages. A 30-year 6% closed mortgage really does have a fixed term and a fixed rate. You know exactly how much you will be paying per month for the next 30 years. An open mortgage means you have the option to pay off or refinance that mortgage at any time over the next 30 years. And you will of course exercise that option at any time when the market interest rate for the remaining term falls below the rate you are currently paying.
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If the option were free, of course you would want an open mortgage. You can’t lose. But, of course, there must be someone taking the other side of the bet. The lender won’t sell you that option for free. You have to pay for it, and you pay for it in higher interest rates.
The longer the remaining term to maturity of the mortgage, the greater the chance that market rates will fall, the more that option is worth, and the higher the interest rate premium you would pay to buy that option. If you only have a couple of months left on the mortgage, interest rates won’t move very far in that short time, so an open mortgage will have only a slightly higher interest rate than a closed mortgage. So even if interest rates on closed mortgages have no trend up or down as the remaining term to maturity shortens over time, interest rates on open mortgages will tend to trend down as the remaining term to maturity shortens. So the option to refinance will probably be exercised again and again.
It’s equally weird and stupid from the lender’s point of view. Lenders aren’t always risk-neutral; they care about interest rate risk and liquidity risk. (…) Why would you ever agree to write a one way bet that you lose if interest rates fall? Falling interest rates are the one thing that retirees and pension plans want to insure against, not bet that they won’t happen! It’s really stupid.
Localice esta nota via un post RortyBomb sobre el tema. Del mismo rescato la siguiente frase:
The idea of home ownership for a broad class of people as a mechanism for building equity and wealth, without government intervention, doesn’t exist
Is There a Distress Risk Anomaly? Corporate Bond Spread as a Proxy for Default Risk
Abstract:
Although financial theory suggests a positive relationship between default risk and equity returns, recent empirical papers find anomalously low returns for stocks with high probabilities of default. The authors show that returns to distressed stocks previously documented are really an amalgamation of anomalies associated with three stock characteristics — leverage, volatility and profitability. In this paper they use a market based measure — corporate credit spreads — to proxy for default risk. Unlike previously used measures that proxy for a firm’s real-world probability of default, credit spreads proxy for a risk-adjusted (or a risk-neutral) probability of default and thereby explicitly account for the systematic component of distress risk. The authors show that credit spreads predict corporate defaults better than previously used measures, such as, bond ratings, accounting variables and structural model parameters. They do not find default risk to be significantly priced in the cross-section of equity returns. There is also no evidence of firms with high default risk delivering anomalously low returns.
Link al Paper
Anomalies and Financial Distress
Abstract:
This paper explores commonalities across asset-pricing anomalies. In particular, we assess implications of financial distress for the profitability of anomaly-based trading strategies. Strategies based on price momentum, earnings momentum, credit risk, dispersion, idiosyncratic volatility, and capital investments derive their profitability from taking short positions in high credit risk firms that experience deteriorating credit conditions. Such distressed firms are highly illiquid and hard to short sell, which could establish nontrivial hurdles for exploiting anomalies in real time. The value effect emerges from taking long positions in high credit risk firms that survive financial distress and subsequently realize high returns. The accruals anomaly is an exception – it is robust amongst high and low credit risk firms as well as during periods of deteriorating, stable, and improving credit conditions.
Link al Paper
Quantitative Finance Club 