Scaling the volatility of credit spreads: evidence from Australian dollar eurobonds

The linear rescaling of the variance of an asset's return is used by many asset pricing models when an annualised risk coefficient is required. However, this approach may not be appropriate for time series, which are not independent and identically distributed (IID). This paper investigates the scaling relationships for daily credit spreads, from January 1995 to May 1998, between AAA-, AA-, and A-rated Australian dollar denominated Eurobonds with maturities of 2, 5, 7, and 10 years. The credit spread return all display similar scaling properties with the estimated standard deviation, based upon a scaling at the square root of time, significantly underestimating the actual level of risk predicted from a normal distribution. These results have implications for risk managers and trading of credit spread instruments.

Announcement effect on the credit spreads of US dollar Malaysian bonds

We find that international political events have more influence on the changes of bond yield spreads from Malaysian USD issues than domestic events. Significant results are consistent across different issues. The resignation by the former Prime Minister, Dr. Mahathir, however created mix response from the market. Using error correction model, this study also found the monetary policy by Federal Reserve have long term and significant impact on the behaviour of the Malaysian USD issues.

Measuring credit spreads of emerging markets

This study found, in the trading of bonds from emerging economies, the international market does not differentiate distinctions between international bonds that were issued by government or corporations. While domestic political and economic issues affect the trading of Malaysian bonds, over the longer term, international economic events leave more significant impact.

Announcement effect on the credit spreads of US dollar Malaysian bonds

The main purpose of this paper is to extend the empirical research on the behavior of credit spreads on the USD denominated Malaysian bonds. We find that international political events have more influence on the changes of bond yield spreads from Malaysian USD issues than domestic events. Significant results are consistent across different issues. However, the resignation by the former Prime Minister, Dr Mahathir Mohamad, created a mixed response from the market. Using an error correction model, this study also found that the monetary policy by the US Federal Reserve has a long-term and significant impact on the behavior of the Malaysian USD issues. This study also provides further evidence that the current theoretical framework is sufficient to explain changes in the credit spread of bonds issued by the emerging market.

An empirical analysis of the Australian dollar swap spreads

This paper examines the relationship between the Australian dollar interest rate swap spread and the term structure of the interest rates, and also the determinants of interest rate swap spreads. For this purpose, we estimate the term structure of interest rates using the parsimonious fitting function of Nelson and Siegel [Journal of Business 60 (1987) 476] for the Australian government bonds and Australian interest rate swaps for certain maturities that are not available. We analyse the swap spread over the term structure of the government bonds and how changes in swap determinants affect the changes in swap spreads. The sample period covers the daily interval from 6 December 1996 to 31 December 1999.

An analysis of sectoral equity and CDS spreads

In this paper, we find that CDS return shocks are important in explaining the forecast error variance of sectoral equity returns for the USA. The CDS return shocks have different effects on equity returns and return volatility in the pre-crisis and crisis periods. It is the post-Lehman crisis period in which the effects of CDS return shocks are the most dominant. Finally, we construct a spillover index and find that it is time-varying and explains a larger share of total forecast error variance of sectoral equity and CDS returns for some sectors than for others.

Counter-credit-risk yield spreads: a puzzle in China's corporate bond market

In this paper, using China's risk-free and corporate zero yields together with aggregate credit risk measures and various control variables from 2006 to 2013, we document a puzzle of counter-credit-risk corporate yield spreads. We interpret this puzzle as a symptom of the immaturity of China's credit bond market, which reveals a distorted pricing mechanism latent in the fundamental of this market. We also find interesting results about relationships between corporate yield spreads and interest rates and risk premia and the stock index, and these results are somewhat attributed to this puzzle.

A perspective on credit derivatives

This contribution offers an explanation of credit derivatives as a group of financial instruments having a common purpose being the managing of credit exposures, and thus credit or default risk. This paper explores the links between their economic and financial manifestations and the legal bases for their widespread application. To ensure an understanding of the purposes served by each of the main types of credit derivatives, a detailed scrutiny of individual instruments is undertaken. Issues relating law and economics to trading in this type of derivative are investigated, then pricing issues and empirical evidence are considered. A summary brings together the range of features bearing upon the effective development of a market in these financial instruments.

Calibration and reliability of a school food checklist: a new tool for assessing school food and beverage consumption

There is a pressing need in Australia and other countries to develop systems for monitoring secular trends in childhood obesity and related behavioural and environmental determinants. Energy from foods and beverages consumed at school is an accessible indicator of children’s eating patterns and we have developed a school food checklist (SFC) to measure this. The SFC records the number of serves and source (home, canteen, vending machine) of 20 food and beverage categories. This study aims to assess the accuracy and to calibrate the SFC by comparing it to a weighed record (WR) and to evaluate inter-recorder reliability. Participants were 910 primary school children aged 5 to 12 years from a rural township in Victoria, Australia. WR were collected from a nonrandom sub-sample of 106 and a second sub-sample (n=46) had intake measured twice using the SFC to assess inter-recorder reliability. Mean energy values were 2992 kJ ± 924 and 3008 kJ ± 952 for the SFC and WR respectively and the correlation coefficient was strong (Pearson r = 0.77). The mean difference between the WR and SFC methods was 15 kJ (95% CI, -107 kJ to 138 kJ) and the limits of agreement (+2 standard deviations) were ± 1270 kJ. The SFC overestimated the energy/serve of breads and fruit drinks and under-estimated energy/serve from fat spreads, biscuits/crackers, muesli/fruit bars and fruit. Inter-recorder reliability was good (kappa 0.51). The SFC was designed to measure energy from food and beverages in schools. It has good accuracy and reliability and the revised version should further improve accuracy of the instrument.

Broadcast anti-jamming systems

In a traditional anti-jamming system a transmitter who wants to send a signal to a single receiver spreads the signal power over a wide frequency spectrum with the aim of stopping a jammer from blocking the transmission. In this paper, we consider the case that there are multiple receivers and the transmitter wants to broadcast a message to all receivers such that colluding groups of receivers cannot jam the reception of any other receiver. We propose efficient coding methods that achieve this goal and link this problem to well-known problems in combinatorics. We also link a generalisation of this problem to the Key Distribution Pattern problem studied in combinatorial cryptography

Lean meat and heart health

The general health message to the public about meat consumption is both confusing and misleading. It is stated that meat is not good for health because meat is rich in fat and cholesterol and high intakes are associated with increased blood cholesterol levels and coronary heart disease (CHD). This paper reviewed 54 studies from the literature in relation to red meat consumption and CHD risk factors. Substantial evidence from recent studies shows that lean red meat trimmed of visible fat does not raise total blood cholesterol and LDL-cholesterol levels. Dietary intake of total and saturated fat mainly comes from fast foods, snack foods, oils, spreads, other processed foods and the visible fat of meat, rather than lean meat. In fact, lean red meat is low in saturated fat, and if consumed in a diet low in SFA is associated with reductions in LDL-cholesterol in both healthy and hypercholesterolemia subjects. Lean red meat consumption has no effect on in vivo and ex vivo production of thromboxane and prostacyclin or the activity of haemostatic factors. Lean red meat is also a good source of protein, omega-3 fatty acids, vitamin B12, niacin, zinc and iron. In conclusion, lean red meat, trimmed of visible fat, which is consumed in a diet low in saturated fat does not increase cardiovascular risk factors (plasma cholesterol levels or thrombotic risk factors).