Sovereign debt and CRAs: Where does the power lie?

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Management from the NOVA – School of Business and Economics

Credit risk stress testing: The Portuguese environment, macroeconomic scenarios and the estimation of losses for corporate sectors

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

Testing for volatility persistence change: The effect of the credit crisis on the Portuguese banks

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

Credit risk of financial institutions

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

Transparency in project bond ratings: Assessment of rating methodologies and development of a proven rating simulator

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

Credit cycle identification: A Markov-switching application

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

The impact of the European sovereign debt crisis on the recovering from the financial crisis: Equity returns of the banking sector

This paper analyses, through a dynamic panel data model, the impact of the Financial and the European Debt crisis on the equity returns of the banking system. The model is also extended to specifically investigate the impact on countries who received rescue packages. The sample under analysis considers eleven countries from January 2006 to June 2013. The main conclusion is that there was in fact a structural change in banks’ excess returns due to the outbreak of the European Debt Crisis, when stock markets were still recovering from the Financial Crisis of 2008.

Credit default swap (CDS) prediction model & trading strategy

This project focuses on the study of different explanatory models for the behavior of CDS security, such as Fixed-Effect Model, GLS Random-Effect Model, Pooled OLS and Quantile Regression Model. After determining the best fitness model, trading strategies with long and short positions in CDS have been developed. Due to some specifications of CDS, I conclude that the quantile regression is the most efficient model to estimate the data. The P&L and Sharpe Ratio of the strategy are analyzed using a backtesting analogy, where I conclude that, mainly for non-financial companies, the model allows traders to take advantage of and profit from arbitrages.

Trading the differences in expectations between the CDS and bond markets

This paper uses the framework developed by Vrugt (2010) to extract the recovery rate and term-structure of risk-neutral default probabilities implied in the cross-section of Portuguese sovereign bonds outstanding between March and August 2011. During this period the expectations on the recovery rate remain firmly anchored around 50 percent while the instantaneous default probability increases steadily from 6 to above 30 percent. These parameters are then used to calculate the fair-value of a 5-year and 10- year CDS contract. A credit-risk-neutral strategy is developed from the difference between the market price of a CDS of the same tenors and the fair-value calculated, yielding a sharpe ratio of 3.2

“The impact of online ratings on video game sales”

Online third-party reviews have been grown over the last decade and they now play an important role as a tool for helping customers evaluate products and services that in many cases offer more than tangible features. This study intends to quantify the impact online ratings have over video game sales by conducting a linear regression analysis on 300 titles for the previous console generation (PlayStation® 3 and Xbox® 360) using a data from the video game industry to understand the existing influence on this particular market. The findings showed that these variables have a weak linear relationship thus suggesting that quality of a title explains little the commercial success of a video game and instead this should cover a wider range of factors. Afterwards, we compare results to previous ones and discuss the managerial implications for upcoming gaming generations.

Millennium BCP- The almond hill credit extension proposal

This Work Project is a case study on the credit lending process and loan pricing policy of Millennium bcp, one of the main Portuguese banks. The goal of the case study is to provide an opportunity to understand the above mentioned process and policy in a major bank and to explore the issues and interests at play when a relevant credit decision must be taken. I would like to thank Dr. José Miguel Pessanha without whom this project would not have been possible.

Fiscal adjustments and sovereign default in different government systems

This paper extends the model of Spolaore (2004) about adjustments in di erent government systems for the context of scal adjustments and sovereign default. We introduce asymmetry between groups in income and preferences towards scal reforms. Default a ects di erently each group and becomes a possibility if reforms are not enacted after public nance solvency shocks, in uencing the political game according to its likelihood. With the extensions, new situations which were not possible with the previous framework arise. After the exposition of the model, the Argentine default in 2001 provides an example of the political con icts addressed by the model.

The impact of credit conditions on market liquidity – a case for European stock markets

The recent financial crisis has drawn the attention of researchers and regulators to the importance of liquidity for stock market stability and efficiency. The ability of market-makers and investors to provide liquidity is constrained by the willingness of financial institutions to supply funding capital. This paper sheds light on the liquidity linkages between the Central Bank, Monetary Financial Institutions and market-makers as crucial elements to the well-functioning of markets. Results suggest the existence of causality between credit conditions and stock market liquidity for the Eurozone between 2003 and 2015. Similar evidence is found for the UK during the post-crisis period. Keywords: stock

Rating corporate groups a modelling experience

This paper aims to provide a model that allows BPI to measure the credit risk, through its rating scale, of the subsidiaries included in the corporate groups who are their clients. This model should be simple enough to be applied in practice, accurate, and must give consistent results in comparison to what have been the ratings given by the bank. The model proposed includes operational, strategic, and financial factors and ends up giving one of three results: no support, partial support, or full support from the holding to the subsidiary, and each of them translates in adjustments in each subsidiary’s credit rating. As it would be expectable, most of the subsidiaries should have the same credit rating of its parent company.

Exploiting the cointrgration between vix and CDS in a credit market timing model

We investigate the cointegration between VIX and CDS indices, and the possibility of exploiting it in an existing credit market timing investment model. We find cointegration over most of the sample period and the leadership of VIX over the CDS in the price discovery process. We present two methods for including cointegration into the model. Both strategies improve the in-sample and out-of-sample model performances, even though out-of-sample results are weaker. We find that in-sample better performances are explained by a stronger cointegration, concluding that in the presence of cointegration our strategies can be profitable in an investment model that considers transaction costs.