In the recent years global credit institutions were characterized by instabilities, consolidations and high levels of distress, with the industry strongly depending on governmental support to avoid a full economical collapse initiated by the unexpected default of Lehman Brothers. As a consequence of the strong state interferences as well as the implicit and explicit governmental guarantees in the midyear of 2010 the Global Financial Crisis turned into a Sovereign Debt Crisis in the peripheral Eurozone, especially for the so-called PIIGS countries (Portugal, Ireland, Italy, Greece and Spain). Consequently,
global banks show a high level of interdependencies with their sovereigns and have been the most discussed industry in global economical markets during the last years. In such periods it is particularly important to understand the drivers of the credit risks within the financial industry. Therefore, the main purpose of this study is to explore the determinants of the credit risk for the global banking universe and to investigate these determinants for robustness during high volatile and structurally changing market environments.
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Inhaltsverzeichnis (Table of Contents)
- Introduction
- Theoretical Principles
- Literature Review
- Determinants of CDS Spreads
- The Credit Grades Framework
- Model Description
- The Classical Credit Grades™ Model
- Extensions to the Credit Grades™ Model
- Literature Review
- Descriptive Analysis
- Data
- Calibration
- Descriptive Statistics
- Empirical Analysis
- The Extended Credit Grades™ Model
- Case Study Analysis
- Cointegration across Equity and CDS Markets
- Credit Spreads Long-Run Pricing Equilibrium
- Price Discovery across Equity and CDS Markets
- Cointegration in the Peripheral Eurozone
- Analysis of the Credit Spread Deviations
- Conclusion and Outlook
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This master's thesis aims to analyze the determinants of credit spreads for financial institutions, specifically focusing on the relationship between equity and CDS markets. It investigates how these markets interact and influence each other, contributing to the understanding of credit risk pricing and potential contagion effects.
- Determinants of credit spreads for financial institutions
- Relationship between equity and CDS markets
- Credit risk pricing and contagion effects
- Cointegration analysis across equity and CDS markets
- Analysis of credit spread deviations
Zusammenfassung der Kapitel (Chapter Summaries)
- Introduction: This chapter provides an overview of the research topic, highlighting the importance of understanding credit spreads in the financial sector. It sets the context for the subsequent analysis, outlining the objectives and the structure of the thesis.
- Theoretical Principles: This chapter delves into the theoretical framework used in the analysis. It reviews existing literature on determinants of CDS spreads and introduces the Credit Grades™ model. The chapter explains the model's structure and its relevance to the research question.
- Descriptive Analysis: This chapter focuses on the data used in the empirical analysis. It describes the data sources, calibration methods, and presents descriptive statistics to gain an initial understanding of the data characteristics.
- Empirical Analysis: This chapter presents the core empirical findings of the thesis. It applies the extended Credit Grades™ model to the data and examines the relationship between equity and CDS markets through cointegration analysis. This analysis explores long-run pricing equilibrium, price discovery dynamics, and the impact of systemic events.
Schlüsselwörter (Keywords)
This master's thesis centers around key terms and concepts including credit spreads, CDS markets, equity markets, cointegration analysis, credit risk, contagion effects, and financial institutions. It examines the interplay between these factors, providing insights into the behavior of financial markets and the pricing of credit risk.
- Quote paper
- Anonym (Author), 2013, Determinants of Credit Spreads of Financial Institutions, Munich, GRIN Verlag, https://www.grin.com/document/308331
