סמינר במימון חשבונאות

Speaker:      Dr. Ariel Levy, Technion – Israel Institute of Technology

Abstract:

In this paper we address the issue of counterparty credit risk in Exchange Traded Notes (ETNs). An ETN is a tracking product which is designed as an unsecured debt security and is therefore subject to the issuer.s default risk. We describe a standard reduced-form pricing framework to gauge the theoretical e¤ect credit risk should have on ETNs. We then derive .rm-speci.c, real market credit risk measures using Credit Default Swap (CDS) data to construct model-implied risk-adjusted ETN prices. Our results indicate that a substantial credit risk discount should be priced into ETNs. In sharp contrast, however, based on real market ETN quotes, we found no evidence for credit risk pricing by market players.

The article can be downloaded from the Finance Accounting seminar webpage :http://recanati.tau.ac.il/eng/finance-seminar