Tag Archives: credit

A credit discriminatory pricing rule

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The models presented in the previous chapters describe the price formation process in markets with different  structures. As we saw in the previous article, among the markets with trade pricing rules, those governed by an order-driven execution system can be organized either as a continuous or as a call auction, while markets with a quote-driven [...]

Lagging indicators of credit quality

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While in a single name context ratings are often criticized for being lagging indicators of credit quality, classifying bonds by rating is one widely used method to reflect the behavior of different risk classes in credit markets. Many market participants argue that spreads themselves and spread volatilities are more timely indicators of an issuer’s credit [...]

Substituted equity by debt

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In the last 20 years there were two periods, when US companies substituted equity by debt, especially by issuing corporate bonds. Consequently, between 1984 and 1990 and in the second half of the 1990s leverage rose dramatically. It also stands out that there were various periods when banks’ lending standards were extremely restrictive and one [...]

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