Cette thèse étudie la dynamique du marché des credit default swaps (CDS), instruments financiers de transfert du risque du crédit, et de ses relations avec les autres marchés, en particulier durant les épisodes de crise. Le marché des CDS a connu un développement vigoureux depuis son émergence, au milieu des années 90. Les volumes de contrats de CDS échangés ont augmenté à un rythme rapide, ce marché a ainsi connu le développement le plus rapide parmi les dérivés négociés de gré-à-gré (over-the-counter – OTC). Les participants de marché, principalement les grandes banques, ont su tirer parti des possibilités offertes par les outils de transfert de risque qui leur ont permis tout d'abord, de disposer d'instruments novateurs de protection contre le risque de crédit, mais aussi d'assurer l'expansion de leur activité d'intermédiation du crédit tout en optimisant les exigences en capital. Bien que le fonctionnement du marché des CDS ait connu une amélioration depuis le début des années 2000, plusieurs éléments mettent en doute l'hypothèse d'un marché efficient et résilient aux périodes de crise. A travers cinq articles empiriques, cette thèse se penche sur deux épisodes de crises durant lesquels le fonctionnement de ce marché a pu être perturbé : d'une part la crise de mai 2005, provoquée par la dégradation en catégorie spéculative de deux entreprises américaines majeures, General Motors et Ford, par les principales agences de notation ; d'autre part la crise financière ayant débuté en 2007 et qui a évolué en crise de la dette souveraine dans le cas des Etats européens à partir de fin 2009. L'étude de ces deux phases de crise montre que le développement du marché des CDS a participé à modifier les relations entre marchés, les investisseurs ayant fait des primes de CDS une source d'information privilégiée pour évaluer le risque de crédit. En effet, les travaux empiriques menés tout au long de la thèse concluent que ce marché est devenu progressivement le lieu où tendait à se dérouler le processus de découverte des prix. Ces travaux mettent également en lumière les vulnérabilités du marché des CDS, renforcées par des effets de contagion déjà à l'œuvre lors de l'épisode de crise de 2005, et incitent à une meilleure régulation des outils de transfert du risque de crédit et, d'une manière plus générale, des dérivés OTC. / This thesis studies the dynamics of the market in credit default swaps (CDS), which are credit risk transfer instruments, and the relationships between the CDS market and other markets, particularly during crisis periods. The CDS market has seen a boom since its emergence, in the mid-90s, and volumes of CDS contracts have increased at a rapid pace. Its growth has thus been the strongest among over-the-counter (OTC) derivatives. Market participants, mainly the major banks, have taken advantage of the opportunities created by credit transfer instruments, which have offered new ways to hedge against credit risk and also contributed to the expansion of their credit intermediation activity, while optimising capital requirements. Despite the improvement of the CDS market's functioning since the early 2000s, several facts call the assumption of an efficient market that is resilient to crisis periods into question. Through five empirical articles, this thesis focuses on two crisis periods which during which the functioning of this market was affected: first, the General Motors and Ford crisis in 2005 following the downgrading of the credit ratings of these two flagship companies to speculative grade; and second, the financial crisis of 2007-2009 which turned into a sovereign debt crisis in the case of European countries from end-2009 onwards. The study of these two crisis periods shows that the growth of the CDS market has contributed to a change in the relationships between markets, as investors tend to regard CDS premia as a prime source of information to assess credit risk. Indeed, the empirical research conducted throughout the thesis concludes that this has gradually become the place where the price discovery process tends to occur. This work highlights the vulnerabilities of the CDS market, reinforced by the contagion effects at work during the 2005 crisis episode, and points to the need for better regulation of credit risk transfer instruments and, more broadly, of OTC derivatives.

La thèse étudie les effets du projet européen de taxation des transactions financières. Elle en analyse les conséquences sur la volatilité, la liquidité, les volumes des marchés d’actions et d’options, ainsi que sur le prix des actions et des obligations. Le Chapitre I, analyse les réactions des teneurs de marché d’option et conclut à un impact non significatif pour les marchés d’options très liquides, et un impact significatif pour les marchés d’options peu liquides, qui est maximal lorsque les positions des teneurs de marché sont détenues jusqu'à leur échéance. Le Chapitre II conclut à une hausse du coût du capital pour les entreprises européennes qui serait défavorisées vis à vis de leurs concurrents situés en dehors de l’EU. C’est la non liquidité des marchés d’options à maturité longue, et l’arbitrage entre dérivés de crédit et actions, qui conduit à cette hausse, d’après le Chapitre I. Le Chapitre III modélise simultanément les prix des actions et des obligations des entreprises. Il conclut à une baisse du prix de ces actifs due à l' introduction de la FTT. Les entreprises à fort levier et taxées à des taux faibles verraient une dépréciation du prix des actions plus élevée que leur concurrentes soumises à des taux plus élevés. Ceci suggère une harmonisation des taux de taxes dans l’EU préalablement à la mise en place de la FTT. Enfin, la FTT, qui déprime le prix des actifs émis par les entreprises, est en conflit avec la règlementation BASEL III qui vise à renforcer leurs fonds propres.En conclusion, notre approche par les options permet de formaliser l’impact sur la volatilité et de trouver une justification à la baisse du prix des actifs mise en évidence par plusieurs études empiriques portant sur des introductions passées de telles taxes au Royaume-Uni et en Suède. / The dissertation reviews the effects, on capital markets, of implementing, within the EU, an excise tax (the FTT) on all financial transactions. We review the effects on the volatility, the liquidity, trading volumes and the price of assets. In Chapter I, we analyze the option market-makers hedging strategies. We conclude to an insignificant effect of the FTT in highly liquid options markets, as opposed to a significant effect in low liquid option markets, the maximum being reached when market makers hold positions until their expiration date. Chapter II evidences a negative impact of the FTT on the corporate cost of capital due to the illiquidity of long dated option markets, and the arbitrage between equity and credit derivatives. The FTT would increase considerably the cost of capital of European companies whose main competitors are outside the EU.In Chapter III, we model both stocks and bonds theoretical prices and conduct simulations of their reaction to the introduction of the FTT. We find that both shares and bond prices will be negatively affected by the FTT, increasing the cost of capital, in the short and long run. Companies with high leverage and a low tax rate will see the price of their shares fall further than the price of shares of comparable, high-tax, leveraged companies. This suggests that EU should level all corporation tax rates, within the EU, prior to the introduction of the FTT. Finally, the FTT has an antagonistic effect to the Basel III regulation which seeks to increase the capital of banks, because at the same time it lowers the prices of securities issued by Banks. In conclusion, our original approach focusing on options, is fruitful. It makes possible to quantify the impact of FTT on volatility and allows a theoretical justification of the negative impact on asset prices found in empirical reviews of past experience of the introduction of a FTT.

Credit derivatives are instruments that transfer the credit risk from one party to another one. The most common credit derivative is the single entity credit default swap (CDS).A basket default is similar to a single entity CDS except that the underlying obligation is a basket of entities rather than a single reference asset. The copula methods play an important role while we price a multiname product since the assets in the portfolio are not independent. We need to model the correlated default times by using copula functions. In this article, we develop a copula based methodology for pricing -to-default swaps by using market CDS quotes. In order to know the influence of changing price drivers such as correlations and intensities on spreads, we also discuss the sensitivity analysis in this article.

This paper investigates the European CDS markets response to earnings announcements between the years 2011-2013. Through the use of event study methodology, we investigate if the CDS market reacts to earnings news in terms of abnormal spread changes. Furthermore, by exploring the pre- and post announcement window the study examines the efficiency of the CDS market. The results imply that earnings announcements provide valuable information to the CDS market, with statistically significant results on the 5 % and 10 % significant level for negative and positive news respectively. Additionally, the paper shows that the market has a rather symmetric reaction to negative and positive earnings news since there is no significant difference in effects. The paper further reveals that there is no significant difference in the response between different credit rating groups. In terms of market efficiency, the study cannot confirm that there is anticipation for earnings announcements. The study further shows that there is no post-earnings announcement drift in the CDS market and that the market, overall, is efficient in incorporating the information into the spreads. Finally, a cross-sectional regression analysis confirms that negative earnings surprises are linked to large announcement day reactions, while positive earnings surprises are not.

1 Abstract This thesis is focused on the financial derivatives. The main goal of this paper is to analyse legal nature of financial derivatives and to present universal definition, general characteristics or utilization of financial derivatives. The other goal of this paper is to describe the development of supervision and regulation before and after The Global Financial Crisis. The thesis is composed of three main chapters. Chapter One is focused on a definition of the financial derivatives as well as the development of derivatives in the fields of history. Chapter Two is dedicated to brief description and explanation of important derivatives types such as forwards, futures, swaps, options and credit derivatives. Chapter Three of this thesis deals with the problems of supervision and regulation of financial derivatives based on American and European law. In response to the causes and effects of The Global Financial Crisis the regulation increased. There were introduced new regulatory legislations which require for example deep transparency of OTC derivatives or settlement of OTC trades through a central counterparty. Key words: financial derivatives, forwards, futures, swaps, options, regulation

The thesis is presents in detail selected financial derivatives, including interest and currency swaps and other appropriate tools to hedge against interest rate and currency risk. It also shows the accounting and valuation procedures and also leads to the classification of risks associated with the selected instruments. Interpretation and analysis are focused on the economic environment in the Czech Republic and is based on the conventions of the local capital market. Theoretical aspects apply a simple model of interest-sensitive portfolios and examine the effectiveness and validity of two basic methods of quantification and risk management - duration and gap analysis. The aim is to demonstrate the importance of the use of derivatives in risk management in the domestic banking system and to identify strengths and weaknesses in the whole process of applying the two compared methods.

by Choi Ming Yee, Fung Lai Shun, So Wai Ching. / Thesis (M.B.A.)--Chinese University of Hong Kong, 1996. / Includes bibliographical references (leaves 87-91). / ABSTRACT --- p.ii / TABLE OF CONTENTS --- p.iii / LIST OF FIGURES --- p.v / LIST OF TABLES --- p.vi / LIST OF ABBREVIATIONS --- p.vii / Chapter / Chapter I. --- INTRODUCTION --- p.1 / Chapter II. --- PERSPECTIVES OF INTEREST RATE --- p.3 / Interest Rate and Capital Market --- p.3 / Trade-off between Current and Future Consumption --- p.3 / An Economy without Exchange --- p.4 / An Economy with Capital Market --- p.5 / Determinants of Interest Rate --- p.7 / Credit Considerations --- p.8 / Term Structure --- p.9 / Loanable Funds --- p.11 / Interest Rate Risk --- p.11 / Interest Rate Volatility --- p.15 / Chapter III. --- DEVELOPMENT OF INTEREST RATE DERIVATIVES --- p.20 / The Emergence of Derivatives Markets --- p.20 / Interest Rate Derivatives Market --- p.23 / Interest Rate Futures --- p.24 / Interest Options --- p.25 / Interest Rate Swaps --- p.27 / Forward Rote Agreements (FRAs) --- p.29 / Chapter IV. --- MACROECONOMIC DEVELOPMENT IN ASIA PACIFIC REGION --- p.31 / Chapter V. --- MOTIVATION FOR FINANCIAL LIBERALIZATION --- p.33 / Limitations in Old Systems --- p.33 / Interest Rate Ceilings --- p.33 / Exchange Controls --- p.34 / Portfolio Selection and Credit Rationing --- p.35 / Taxes and Reserve Requirement --- p.37 / Advantage of Liberalization --- p.38 / Chapter VI. --- ECONOMIC VOLATILITY --- p.41 / Capital Mobility and International Integration --- p.41 / Monetary Policy --- p.45 / Chapter VII. --- THE DEMAND AND SUPPLY OF INTEREST RATE DERIVATIVES --- p.48 / Can Hedging Add Value to the Company? --- p.49 / Can Hedging Alter the Discount Rate of a Company? --- p.49 / Chapter VIII. --- THE ASIAN MARKET --- p.58 / New Derivatives Exchanges --- p.61 / Chapter IX. --- FORCES DRIVING DERIVATIVES GROWTH --- p.63 / Sustained Shifts in Volatility --- p.64 / The Demand for New Ways to Transfer Interest Rate Risk --- p.66 / The Demand for Liquidity --- p.69 / Chapter X. --- THE FUTURE --- p.81 / APPENDIX --- p.86 / BIBLIOGRAPHY --- p.87

Over the past decade, numerous engineered credit events and cases of market participants manipulating bond prices to influence Credit Default Swap (CDS) auction payouts have occurred. These cases have become increasingly common, and the CFTC has stated they may constitute market manipulation and undermine not only the CDS market but also the credit derivative and default markets. Although there is a plethora of news and media coverage on publicized cases, there is no previous empirical research on evidence of these practices. This paper is motivated by the desire to determine if there is indirect evidence of bond price manipulation around default and of market participants’ attempts to favorably move CDS’s underlying bond prices to achieve more profitable positions around default and emerging from CDS auctions. The analysis is performed by analyzing the effect of a bonds’ inclusion in CDS auctions on bond return volatility around the time of default while controlling for credit risk, illiquidity, firm fundamentals, and other bond-level controls. I find that bond return volatility around default is much higher as a result of a bond’s inclusion in a CDS auction, which serves as indirect evidence of bond price manipulation around default as market participants strive for more profitable CDS auction outcomes and possibly of manufactured credit events. Consistent with previous literature, I also find that bond illiquidity significantly impacts bond return volatility. My results are robust to propensity score matching, implementing double-robust estimators, and controlling for any time-varying cross-sectionally-invariant fluctuations in bond return volatility.

Credit derivatives are among the most criticized financial instruments in the current credit crises. Given their short history, finance professionals are still researching to discover effective ways to reduce the mark-to-market (MTM) volatility in credit derivatives, especially in turbulent market conditions. Many credit portfolios have been struggling to find out appropriate tools and techniques to help them navigate the current credit crises and hedge mark-to-market volatility in their portfolios. In this study we provide a tool kit to help reduce the pricing fluctuations in structured credit portfolios utilizing data analysis and statistical methods. In Chapter One we provide a snapshot of credit derivatives market by summarizing different types of credit derivatives; including single-name credit default swaps (CDS), market credit indices, bespoke portfolios, market index tranches, and bespoke tranches (synthetic CDOs). In Chapter Two we illustrate a method to calculate a stable hedge ratio (beta) by combining industry practices and statistical techniques. Choosing an appropriate hedge ratio is critical for funds that desire to hedge mark-to-market volatility. Many credit portfolios suffered 40%-80% market value losses in 2008 and 2009 due to the mark-to-market volatility in their long positions. In this chapter we introduce ten different betas in order to hedge a long bespoke portfolio by liquid market indices. We measure the effectives of these betas by two measures: Stability and mark-to-market volatility reduction. Among all betas we present, we deduct that the following betas are appropriate to be used as hedge ratios: Implied Beta, Quarterly Regression Beta on Spread Levels, Yearly Regression Betas on Spread Levels, Up Beta, and Down Beta. In Chapter Three we analyze the risk factors that impact the MTM volatility in CDS tranches; namely Spread Risk, Correlation Risk, Dispersion Risk, and Curve Risk. We focus our analysis in explaining the risks in the equity tranche as this is the riskiest tranche in the capital structure. We show that all four risks introduced are critical in explaining MTM volatility in equity tranches. We also perform multiple regression analysis to show the correlations between different risk factors. We show that, when combined, spread, correlation, and dispersion risks are the most important risk factors in analyzing MTM fluctuations in equity tranche. Curve risk can be used as an add-on risk to further explain local instances. After understanding various risk factors that impact the MTM changes in equity tranche, we put this knowledge to work to analyze two instances in 2008 in which we experienced significant spread widening in equity tranche. Both examples show that a good understanding of the risks that drive MTM changes in CDS tranches is critical in making informed trading decisions. In Chapter Four we focus on two topics: Portfolio Stratification and Index Selection. While portfolio stratification helps us better understand the composition of a portfolio, index selection shows us which indices are more suitable in hedging long bespoke positions. In stratifying a portfolio we define Class-A as the widest credits, Class-B as the middle tier, and Class-C as the tightest credits in a credit portfolio. By portfolio stratification we show that Class-A has significant impact on the overall portfolio. We use five different risk measures to analyze different properties of the three classes we introduce. The risk measures are Sum of Spreads (SOS), Sigma/Mu, Basis Point Volatility (BPVOL), Skewness, and Kurtosis. For all risk measures we show that there is high correlation between Class-A and the whole portfolio. We also show that it is critical to monitor the risks in Class-A to better understand the spread moves in the overall portfolio. In the second part of Chapter Four, we perform analysis to find out which credit index should be used in hedging a long bespoke portfolio. We compare four credit indices for their ability to track the bespoke portfolio on spread levels and on spread changes. Analysis show that CDX.HY and CDX IG indices fits the best to hedge our sample bespoke portfolio in terms of spread levels and spread changes, respectively. Finally, we perform multiple regression analysis using backward selection, forward selection, and stepwise regression methods to find out if we should use multiple indices in our hedging practices. Multiple regression analysis show that CDX.HY and CDX.IG are the best candidates to hedge the sample bespoke portfolio we introduced.

交換交易(Swaps)是1980年代金融創新最成功的例子之一，自推出以來市場交易量成長快速。在歐美等先進國家，交換交易已是一項相當普遍的金融商品，但在我國政府積極推動台灣成為亞太金融中心的成立之際，交換交易卻仍是一項對大眾而言相當陌生的金融商品，到底交換交易是一向怎樣的產品？為讓它順利發展，又須克服哪些障礙？乃是引起本研究的主要動機，此外引起本研究之動機還有：1. 交換交易是一項具效率性及完全性的成功金融創新商品。2. 交換交易具有相當多的利益。3. 為瞭解我國企業對交換交易之應用。 　　本研究的主要目的有三：1. 瞭解我國上市公司、金融機構、金融商品主管機關對使用交換交易的看法，並以數量統計方法比較與解釋問卷調查的結果，以探討我國市場對此金融商品之使用意願、使用動機及使用結果。2. 探討使用交換交易及其他衍生性金融商品風險管理之課題。3. 瞭解交換交易在我國發展時所面臨的障礙，提出建議及政府應考慮的配合措施。 　　本研究針對非經營艱困之上市公司，採普查的方式，分別寄發問卷做意見調查，以蒐集上市公司對交換交易的使用意願、使用動機、交易內容及衍生性金融商品風險管理態度等資料。並使用ANOVA、卡方檢定統計方法來檢定使用意願與公司規模、國際化程度、產業別之間的關連。檢驗結果發現：有意願與無意願使用貨幣交換之兩類公司在公司規模、國際化程度上有顯著性差異，在產業別則無顯著性差異；有意願與無意願使用利率交換之兩類公司在公司規模有顯著性差異，在國際化程度及產業別則無顯著性差異。此外，本研究也以國外現有之衍生性金融商品規範為基礎，歸納出一內部控制制度管理核對表，以提供企業界在建立內部控制制度時之參考。最後，針對已使用及未使用交換交易的公司、交換仲介者及主管機關進行實地訪談。