by Yow Nga-Yee. / Thesis (M.B.A.)--Chinese University of Hong Kong, 1999. / Includes bibliographical references (leaves 35-36). / ABSTRACT --- p.ii / TABLE OF CONTENTS --- p.iii / LIST OF ILLUSTRATIONS --- p.iv / LIST OF TABLE --- p.v / Chapter / Chapter I. --- INTRODUCTION --- p.1 / Market Structure --- p.1 / Chapter II. --- VALUATION OF CREDIT RISK --- p.9 / Introducing CreditMetrics --- p.10 / Credit rating anomalies --- p.15 / Application of bond analysis to the Hong Kong Market --- p.15 / Chapter III. --- METHODOLOGY OF HONG KONG BOND RATING --- p.18 / Rating at a Global Perspective --- p.19 / Country risk: Emerging markets --- p.22 / Chapter III. --- COMPARISON BETWEEN HONG KONG BOND AND US BOND OF SAME CREDIT RATING --- p.26 / Methodology --- p.26 / The result --- p.27 / Discussion of the data set --- p.29 / Explanations of the result --- p.30 / Chapter IV. --- CONCLUSION --- p.33 / BIBILIOGRAPHY --- p.48

Li Ka-leung. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2005. / Includes bibliographical references (leaves 85-88). / Abstracts in English and Chinese. / Chapter 1 --- Introduction --- p.1 / Chapter 2 --- Structural models of credit risk --- p.9 / Chapter 2.1 --- The original Merton model --- p.10 / Chapter 2.2 --- The extended Merton model --- p.11 / Chapter 2.3 --- The Black and Cox model --- p.12 / Chapter 2.4 --- The LS model --- p.14 / Chapter 2.5 --- The CDG model --- p.16 / Chapter 2.6 --- Comments on structural models --- p.19 / Chapter 3 --- Proxies and their implications --- p.20 / Chapter 3.1 --- Reviews of the EHH's empirical studies --- p.20 / Chapter 3.2 --- The proxy for market values of firms --- p.23 / Chapter 3.2.1 --- Zero coupon bonds under the Merton model --- p.23 / Chapter 3.2.2 --- Coupon bearing bonds under the extended Merton model --- p.25 / Chapter 3.2.3 --- Zero coupon bonds under the LS model --- p.26 / Chapter 3.2.4 --- Coupon bearing bonds under the LS model --- p.28 / Chapter 3.3 --- Implications of other proxies --- p.29 / Chapter 4 --- Maximum Likelihood Estimation --- p.33 / Chapter 4.1 --- The MLE approach for the Merton model --- p.33 / Chapter 4.2 --- The MLE approach for the barrier dependent models --- p.35 / Chapter 4.3 --- Survivorship consideration --- p.36 / Chapter 4.4 --- Simulation tests --- p.37 / Chapter 4.5 --- Simulation results --- p.39 / Chapter 4.5.1 --- Simulation results for the Merton model --- p.39 / Chapter 4.5.2 --- Simulation results for the LS model --- p.42 / Chapter 5 --- Empirical test --- p.47 / Chapter 5.1 --- Criteria of bond selection --- p.47 / Chapter 5.2 --- Parameters of models --- p.51 / Chapter 5.2.1 --- Firm specific parameters --- p.51 / Chapter 5.2.2 --- Interest rate parameters --- p.54 / Chapter 5.2.3 --- Stationary leverage process parameters --- p.55 / Chapter 5.2.4 --- Bond specific parameters --- p.57 / Chapter 5.3 --- Empirical results --- p.58 / Chapter 5.3.1 --- Empirical results for the Merton model --- p.59 / Chapter 5.3.2 --- Empirical results for the LS model --- p.66 / Chapter 5.3.3 --- Empirical results for the CDG model --- p.71 / Chapter 6 --- Conclusion --- p.77 / Appendix --- p.80 / Chapter A.1 --- Appendix 1 --- p.80 / Chapter A.2 --- Appendix 2 --- p.82 / Chapter A.3 --- Appendix 3 --- p.84 / Bibliography --- p.85

The purpose of this study is to investigate the usefulness of statistical decomposition measures in the prediction of industrial bond rating changes. Further, the predictive ability of decomposition measures is compared with multiple discriminant analysis on the same sample. The problem of this study is twofold. It stems in general from the statistical problems associated with current techniques employed in the study of bond ratings and in particular from the lack of attention to the study of bond rating changes. Two main hypotheses are tested in this study. The first is that bond rating changes can be predicted through the use of financial statement data. The second is that decomposition analysis can achieve the same performance as multiple discriminant analysis in duplicating and predicting industrial bond rating changes. To explain and predict industrial bond rating changes, statistical decomposition measures were computed for each company in the sample. Based on these decomposition measures, the two types of analyses performed were (a) a univariate analysis where each decomposition measure was compared with an industry average decomposition measure, and (b) a multivariate analysis where decomposition measures were used as independent variables in a probability linear model. In addition to statistical decomposition analysis, multiple discriminant analysis was used in duplicating and predicting bond rating changes. Finally, a comparison was made between the predictive abilities of decomposition analysis and discriminant analysis.

This dissertation deals with one aspect of how city officials respond to community needs. It is about the decisions of governments on how to secure the financial resources needed to fulfill their obligations to the public. The study explores the factors that influence officials' decisions to issue debt. It is different from other municipal bond studies in that it focuses on the behavior of bond issuers rather than bond investors and the rating agencies.

This dissertation examines the reaction of common stock prices to changes in bond ratings by Moody's Bond Service. The question is whether an announcement of a re-rating by Moody's is new information. There are only two studies of stock price reaction to bond changes and the results are conflicting. Pinches and Singleton (1978) [PS] concluded that any reaction comes well before the re-rating. Griffin and Sanvicente (1982) [GS] found that their portfolio test indicated that rating changes do convey new information. This was particularly true for downgradings. Both studies used monthly data and neither performed a statistical testing of residual reversals. PS provided a graph of the residuals which indicated the presence of a reversal trend. GS provided no information on this topic. This study, using daily data and the cumulative prediction error technique, finds that bond re-ratings offer new information. The results indicate that the market only partially anticipates the bond change. For the downgrades, the excess return on the announcement day is .6% which is statistically significant. The residuals reverse after the announcement day, but are not statistically significant. The upgrades do not have a significant reaction on the announcement day, but have a statistically significant negative reaction from day 1 to 10. The cumulative residual for days 1 to 10 is -2.8% with a test statistic of -3.85. This study finds as PS that there is some anticipation for both upgrades and downgrades. It extends their work by statistically testings the reversals after the announcement date and by testing the announcement day effect. There is significant abnormal return for the downgrades on the announcement day and the upgrades have a significant reversal in their residuals from day 1 to 10. This provides both support and extension of Griffin and Sanvicente's results and suggests that Moody's is offering the market new information.

This dissertation examines the reaction of common stock prices to the announcement of changes in bond ratings by Moody's Bond Service, while having a control for differential information availability. The Institutional Brokers Estimate System (I/B/E/S) number of security analysts and coefficient of variation of earning per share (EPS) estimates are used as a proxy for information availability of the firms. Past studies differs in their conclusions as to whether the market has responded to announcement of bond rating changes. None of past studies have controlled for differential information availability. This study, using daily stock returns data and the event study methodology with the statistical test, finds that while the sample of rating downgrades exhibit significantly negative abnormal price effect during the announcement period, the magnitude of this effect is significantly higher for firms with low information availability. For the rating upgrades, the sample as a whole has no abnormal announcement period returns, but the sample of firms with lower information earns significantly positive abnormal returns. This study provides support for the hypothesis that the announcement effect of bond-rating changes is conditional on the information available about the firm.

In South Africa, over-the-counter (OTC) bond options may be used in order to either hedge or speculate. However, since 2001, this market deteriorated significantly. The current research assessed the role of the local bond option market, reasons for the deterioration of the South African OTC bond option market, and how this bond option market could possibly be restored as a primary hedging instrument. The opinions of individuals operating in this market were obtained using a questionnaire. In the opinion of the respondents, wide bid–offer spreads, regulatory interferences and poor participation within this market caused market deterioration. The market could be restored as a hedging instrument if effective market integration exists, interbank trading regularly takes place, liquidity was enhanced, transparency increased and investor knowledge improved. Future research could focus on regulatory transformation, the types of derivatives used for hedging, and an assessment of appropriate continuous professional development interventions for investors. / Business Management / M. Com. (Business Management)

In South Africa, over-the-counter (OTC) bond options may be used in order to either hedge or speculate. However, since 2001, this market deteriorated significantly. The current research assessed the role of the local bond option market, reasons for the deterioration of the South African OTC bond option market, and how this bond option market could possibly be restored as a primary hedging instrument. The opinions of individuals operating in this market were obtained using a questionnaire. In the opinion of the respondents, wide bid–offer spreads, regulatory interferences and poor participation within this market caused market deterioration. The market could be restored as a hedging instrument if effective market integration exists, interbank trading regularly takes place, liquidity was enhanced, transparency increased and investor knowledge improved. Future research could focus on regulatory transformation, the types of derivatives used for hedging, and an assessment of appropriate continuous professional development interventions for investors. / Business Management / M. Com. (Business Management)