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See detailThe dynamics of market, credit and liquidity risk in the US corporate bond market
Heck, Stéphanie ULg

Doctoral thesis (2016)

Market, credit and liquidity constitute important risk factors in financial markets. Investors looking for optimal combinations of risk and return have to monitor their portfolios with regard to each of ... [more ▼]

Market, credit and liquidity constitute important risk factors in financial markets. Investors looking for optimal combinations of risk and return have to monitor their portfolios with regard to each of those factors. This work brings answers to some of the challenges presented by these three risk factors in the US corporate bond market. Market risk is the earliest and most widely acknowledged risk factor, affecting all financial securities. The risk that the issuer of the bond might go bankrupt introduces credit risk for corporate bonds. Finally, these securities are also characterized by a low trading frequency. Liquidity in this market has been severely affected by the recent global financial crisis as well as by the regulatory changes that followed the crisis. The first part of this dissertation studies the return premium investors require in compensation for undertaking credit risk. It is shown that distributional characteristics of individual assets and in particular the contribution of an asset’s return to the market portfolio’s skewness and kurtosis are important determinants of these premiums. The second part explores commonality in individual bond liquidity levels. It is shown that the pricing of liquidity in yield spreads is essentially due to this commonality. The final part of this dissertation designs a corporate bond market index based on the repeat-sales technique. The index adequately captures aggregate market dynamics and contributes to the explanation of the cross-section of individual corporate bond returns. [less ▲]

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See detailLiquidity patterns in the US corporate bond market
Heck, Stéphanie ULg; Margaritis, Dimitri; Muller, Aline ULg

Conference (2015, November 19)

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See detailThe systematic price of credit risk
François, Pascal; Heck, Stéphanie ULg; Hübner, Georges ULg et al

Conference (2015, June 01)

Using corporate bond index series over a period of 16 years, we provide a detailed decomposition of a bond’s expected returns. We are able to distinguish between the pre- mium related to systematic ... [more ▼]

Using corporate bond index series over a period of 16 years, we provide a detailed decomposition of a bond’s expected returns. We are able to distinguish between the pre- mium related to systematic default risk and the premium related to the default event. We further analyze the determinants of expected returns and of the identified risk premiums, using variables constructed from credit markets, from stock markets and from moment related risk. The variables successfully explain a large part of the variations in those two premiums, however the signs on the variables are exactly opposed in the explanation of the systematic default risk premium and the default event premium. [less ▲]

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See detailLiquidity patterns on the US corporate bond market
Heck, Stéphanie ULg; Margaritis, Dimitri; Muller, Aline ULg

Conference (2014, December 13)

Liquidity commonality exists and empirical evidence (e.g. Lin et al., 2011) indicates that exposure to this common liquidity factor is priced in the cross-section of corporate bonds. The existence of ... [more ▼]

Liquidity commonality exists and empirical evidence (e.g. Lin et al., 2011) indicates that exposure to this common liquidity factor is priced in the cross-section of corporate bonds. The existence of commonality implies that part of a bond’s illiquidity is left as idiosyncratic. In this paper, we study how illiquidity components explain the cross-section of bond yields and how this relationship varies over time and across bond categories. We use a factor decomposition to break down total illiquidity into a common and an idiosyncratic component and analyze how yields relate differentially to each of these two components. We find that a bond’s idiosyncratic illiquidity is important, which might reflect informational asymmetries compounded by the lack of diversification in the institutional investors’ portfolios. Moreover, the relation between illiquidity and yield spreads appears to be negative during the recent crisis period. [less ▲]

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See detailJapanese central bank interventions and the dispersion of individual exchange rate expectations: differential impact on four moment characteristics
Heck, Stéphanie ULg; Muller, Aline ULg

in International Journal of Behavioral Finance and Accounting (2011), 2(2), 152-177

Detailed reference viewed: 71 (25 ULg)