Michael Jacobs Jr, Ahmet K. Karagozoglu and Dina Naples Layish
This research aims to model the relationship between the credit risk signals in the credit default swap (CDS) market and agency credit ratings, and determines the factors that…
Abstract
Purpose
This research aims to model the relationship between the credit risk signals in the credit default swap (CDS) market and agency credit ratings, and determines the factors that help explain the variation in such signals.
Design/methodology/approach
A comprehensive analysis of the differences in the relative credit risk assessments of CDS-based risk signals and agency ratings is provided. It is shown that the divergence between credit risk signals in the CDS market and agency ratings is explained by factors which the rating agencies may consider differently than credit market participants.
Findings
The results suggest that agency credit ratings of relative riskiness of a reference entity do not always correspond with assessments by CDS spreads, as the price of risk is a function of additional macro and micro factors that can be explained using statistical analysis.
Originality/value
This research is unique in modeling the relationship between the credit risk assessments of the CDS market and the agency ratings, which to the best of the authors' knowledge has not been analyzed before in terms of their agreement and the level of discrepancy between them. This model can be used by investors in debt instruments that are not explicitly CDSs or which have illiquid CDS contracts, to replicate market-based, point-in-time credit risk signals. Based on both market-based and firm-specific factors in this model, the results can be used to augment through-the-cycle credit risk assessments, analyze issues surrounding the pricing of CDSs and examine the policies of credit rating agencies.
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The purpose of this paper is to build an easy to implement, pragmatic and parsimonious yet accurate model to determine an exposure at default (EAD) distribution for CCL…
Abstract
Purpose
The purpose of this paper is to build an easy to implement, pragmatic and parsimonious yet accurate model to determine an exposure at default (EAD) distribution for CCL (contingent credit lines) portfolios.
Design/methodology/approach
Using an algorithm similar to the basic CreditRisk+ and Fourier Transforms, the authors arrive at a portfolio level probability distribution of usage.
Findings
The authors perform a simulation experiment which illustrates the convolution of two portfolio segments to derive an EAD distribution, chosen randomly from Moody's Default Risk Service (DRS) database of CCLs rated as of 12/31/2008, to derive an EAD distribution. The standard deviation of the usage distribution is found to decrease as we increase the number of puts used, but the mean value remains relatively stable, as the extreme points converge towards the mean to produce a shrinkage in the spread of the distribution. The authors also observe, for the sample portfolio, that an increase in the additional usage rate level also increases the volatility of the associated exposure distribution.
Practical implications
This model, in conjunction with internal bank financial institution research, can be used for banks' EAD estimation as mandated by Basel II for bank CCL portfolios, or implemented as part of a Solvency II process for insurers exposed to credit sensitive unfunded commitments. Apart from regulatory requirements, distributions of stochastic exposure generated can be inputs for different economic capital models and stress testing procedures used to capture an accurate risk profile of the portfolio, as well as providing better insights into the problem of managing liquidity risk for a portfolio of CCLs and similar exposures.
Originality/value
In‐spite of the large volume of CCLs in portfolios of financial institutions all (for commercial banks holding these as well as for insurance companies having analogous exposures), paucity of EAD models, unsuitability of external data and inconsistent internal data with partial draw‐downs have been a major challenge for risk managers as well as regulators in managing CCL portfolios.
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– This study aims to survey supervisory requirements and expectations for counterparty credit risk (CCR).
Abstract
Purpose
This study aims to survey supervisory requirements and expectations for counterparty credit risk (CCR).
Design/methodology/approach
In this paper, a survey of CCR including the following elements has been performed. First, various concepts in CCR measurement and management, including prevalent practices, definitions and conceptual issues have been introduced. Then, various supervisory requirements and expectations with respect to CCR have been summarized. This study has multiple areas of relevance and may be extended in various ways. Risk managers, traders and regulators may find this to be a valuable reference. Directions for future research could include empirical analysis, development of a theoretical framework and a comparative analysis of systems for analyzing and regulating CCR.
Findings
Some of the thoughts regarding the concept of risk will be considered and surveyed, and then how these apply to CCR will be considered. A classical dichotomy exists in the literature, the earliest exposition upon which is credited to Knight (1921), who defines uncertainty is when it is not possible to measure a probability distribution or it is unknown. This is contrasted with the situation where either the probability distribution is known, or knowable through repeated experimentation. Arguably, in economic and finance (and more broadly in the social or natural as opposed to the physical or mathematical sciences), the former is a more realistic scenario that is being contending with (e.g. a fair vs loaded die, or die with unknown number of sides.) The authors are forced to rely upon empirical data to estimate loss distributions, but this is complicated because of changing economic conditions, which invalidate forecasts that our econometric models generate.
Originality/value
This is one of few studies of the CCR regulations that is so far-reaching.
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Michael J. Brusco and Larry W. Jacobs
Examines an alternative approach to labour utilisation, based onthe concept of simulated annealing, implemented on a microcomputer.Demonstrates the use of the new approach in a…
Abstract
Examines an alternative approach to labour utilisation, based on the concept of simulated annealing, implemented on a microcomputer. Demonstrates the use of the new approach in a study of the potential labour utilisation effect of two types of scheduling flexibility: shift length flexibility and meal‐break placement flexibility. Finally, offers implications of the new approach for management.
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Emily Machado, Rebecca Woodard, Andrea Vaughan and Rick Coppola
This study examines how writing teachers manage linguistic ideological dilemmas (LIDs) around grammar instruction and highlights productive strategies employed by one teacher in…
Abstract
This study examines how writing teachers manage linguistic ideological dilemmas (LIDs) around grammar instruction and highlights productive strategies employed by one teacher in an instructional unit on poetry. We conducted semi-structured interviews with nine elementary and middle-school teachers to better understand how they conceptualized and enacted writing pedagogies in urban classrooms. Then, we documented the teaching practices of one teacher during a 9-week case study. We describe three LIDs expressed by the teachers we interviewed: (1) a perception of greater linguistic flexibility in speech than in writing; (2) a sense that attention to grammar in feedback can enhance and/or inhibit written communication; and (3) apprehension about whether grammar instruction empowers or marginalizes linguistically minoritized students. We also highlight three productive strategies for teaching grammar while valuing linguistic diversity employed by one teacher: (1) selecting mentor texts that showcase a range of grammars; (2) modeling code-meshing practices; and (3) privileging alternative grammars while grading written work. We describe how teachers might take up pedagogical practices that support linguistic diversity, such as evaluating written assignments in more flexible ways, engaging in contrastive analysis, and teaching students to resist and rewrite existing language rules.
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R. Glenn Richey, Mert Tokman, Robert E. Wright and Michael G. Harvey
This manuscript develops a reverse logistics monitoring system for controlling reverse flows of materials through marketing channels in emerging economies. Institutional theory is…
Abstract
This manuscript develops a reverse logistics monitoring system for controlling reverse flows of materials through marketing channels in emerging economies. Institutional theory is incorporated to show that both positive and negative impacts on environmental sustainability can be predicted. A partner control framework and scales are then developed for use by managers and researchers in furthering their understanding of the effective management of global reverse logistic networks
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Tom Schultheiss and Linda Mark
The following classified, annotated list of titles is intended to provide reference librarians with a current checklist of new reference books, and is designed to supplement the…
Abstract
The following classified, annotated list of titles is intended to provide reference librarians with a current checklist of new reference books, and is designed to supplement the RSR review column, “Recent Reference Books,” by Frances Neel Cheney. “Reference Books in Print” includes all additional books received prior to the inclusion deadline established for this issue. Appearance in this column does not preclude a later review in RSR. Publishers are urged to send a copy of all new reference books directly to RSR as soon as published, for immediate listing in “Reference Books in Print.” Reference books with imprints older than two years will not be included (with the exception of current reprints or older books newly acquired for distribution by another publisher). The column shall also occasionally include library science or other library related publications of other than a reference character.
Communications regarding this column should be addressed to Mrs. Cheney, Peabody Library School, Nashville, Term. 37203. Mrs. Cheney does not sell the books listed here. They are…
Abstract
Communications regarding this column should be addressed to Mrs. Cheney, Peabody Library School, Nashville, Term. 37203. Mrs. Cheney does not sell the books listed here. They are available through normal trade sources. Mrs. Cheney, being a member of the editorial board of Pierian Press, will not review Pierian Press reference books in this column. Descriptions of Pierian Press reference books will be included elsewhere in this publication.
Michael P. Leiter, Emily Peck and Stephanie Gumuchian
Workplace incivility has been identified as a specific form of social mistreatment causing distress despite its low intensity. Research on workplace incivility has touched on a…
Abstract
Workplace incivility has been identified as a specific form of social mistreatment causing distress despite its low intensity. Research on workplace incivility has touched on a variety of personal and contextual factors associated with incivility’s prevalence including research on both antecedents and outcomes. The research has been especially concerned with identifying a wide range of negative consequences of incivility, including various occupational, interpersonal, and health-related implications. Theoretical explorations have considered links of incivility to sexism and racism, and its reflection of attachment styles, as well as its inherent connection with the stressor-emotion model of counterproductive work behavior (Spector & Fox, 2005). The power of incivility to elicit distress has been attributed to its capacity to signal riskiness of social situations that thwart core social motives (i.e., self-control). Intervention research has been relatively rare, but progress is evident.