Sovereign credit risk and exchange rates: Evidence from CDS quanto spreads
Authors: Patrick Augustin, Mikhail Chernov and Dongho Song
Publication: Journal of Financial Economics, Forthcoming
Abstract:
Sovereign CDS quanto spreads tell us how financial markets view the interaction between a country鈥檚 likelihood of default and associated currency devaluations (the Twin Ds). A no-arbitrage model applied to the term structure of Eurozone quanto spreads can isolate the Twin Ds and gauge the associated risk premiums. Conditional on the occurrence of default, the true and risk-adjusted 1-week probabilities of devaluation are 42% (2%) and 90% (55%) for the core (periphery) countries. The weekly risk premium for Euro devaluation in case of default for the core (periphery) exceeds the regular currency premium by up to 18 (13) basis points.
Measuring sovereign bond market integration
Authors: Ines Chaieb, Vihang Errunza, and Rajna Gibson Brandon
Publication: The Review of Financial Studies, Forthcoming
Abstract:
There is significant heterogeneity in the degree and dynamics of sovereign bond market integration across 21 developed and 18 emerging countries. We show that better spanning can significantly enhance market integration through local risk premia dissipation. Integration of the sovereign bond markets increases on average by about 10%, when a country moves from the 25th percentile to the 75th percentile as a result of higher political stability and credit quality, lower inflation and inflation risk, and lower illiquidity. The 10% increase in integration leads to, on average, a decrease in the sovereign cost of funding of about 1% per annum.
When the index fund bubble pops
Professor Mo Chaudhury weighs in on the market risks caused by the growing popularity of index funds.
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Weighing the value of cryptocurrency
Professor Fahad Saleh publishes a new paper that examines the social and political impact of bitcoin and other cryptocurrencies.
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Guillaume Roussellet awarded 2019 FRQSC New Academics Grant
Congratulations to聽Guillaume Roussellet,聽Assistant Professor in Finance,聽awarded 2019 FRQSC New Academics Grant (Soutien 脿 la recherche pour la rel猫ve professorale) 鈥淔acteurs de volatilit茅 et valorisation du VIX鈥�
Meet the best MBA professors
Congratulations to Professor Sujata Madan who was named by Poets & Quants among the favorite MBA professors for 2019.
How do informed traders trade based on insider information?
If previous research has identified the existence of informed trading in the options markets, new work co-authored by Professor Patrick Augustin takes it a step further, offering insights into the actual strategies informed investors are likely to use.
Rethinking pensions for today
Professor Sebastien Betermier pens a piece for American Business Magazine in which he explores why the switch over to a Defined-Contribution pension might not be the best way to go and proposes other models that can better ensure a comfortable retirement for contributors.
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Cross-Listings and the Dynamics between Credit and Equity Returns
Authors: Patrick Augustin, Feng Jiao, Sergei Sarkissian, and Michael J. Schill
Publication: The Review of Financial Studies, Forthcoming
Abstract:
Cannabis legalization: Six months later
Desautels Faculty Lecturer Ken Lester joins Breakfast Television to explore how the legalization of marijuana has taken hold over the past six months and what the next chapter holds, including the rise of edibles and the further streamlining of distribution.
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Desautels students take home top prize at PRMIA
Congratulations to the Desautels Capital Management Team comprised of BCom students Ludovic Van den Bergen, Emilie Granger, Ian Jiang, and Roy Chen Zhang who won first place and $10,000 in prize money at the 2019 PRMIA Risk Management competition.
Still an uphill battle for women in finance
Following the release of the American Economic Association鈥檚 survey results revealing the predominance of discrimination against women in the world of finance, Professor Francesca Carrieri affirms that the findings are not surprising.
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Tricks of the trade: Unmasking insider trading tactics
A new paper co-authored by Professor Patrick Augustin spotlights some of the strategies that insider traders in the options market might use, as well as provides insight into where regulators might start to detect illegal trading activities 鈥� a daunting task given the magnitude of the stocks and bonds being traded.
Reflecting on MIPC 2018
Avantages reports on the 2018 缅北强奸 International Portfolio Challenge (MIPC), which saw 90 teams from around the world compete for a $25,000 grand prize.
Students to the rescue of a U.S. pension system in peril
The U.S. pension plan shortfall has the makings of a perfect storm 鈥� so who is heeding the call to help remedy a seemingly insurmountable problem?
Enter Professor Sebastien Betermier, a group of Desautels BCom students and the 缅北强奸 International Portfolio Challenge (MIPC).
