Browsing by Author "Clift, Peter-John"

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    Credit curve estimation and corporate bonds in the South African market
    (Stellenbosch : Stellenbosch University, 2020-03) Clift, Peter-John; Conradie, W. J. (Willem Johannes); Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Statistics and Actuarial Science.
    ENGLISH SUMMARY : Accurate fair value measurement of financial instruments serves as one of many mechanisms to enhance the integrity of financial institutions, particularly as it relates to counterparty credit risk. In this study, specific reference is made to credit spreads and the information that can be inferred from it for the purpose of fair value measurement. Market observable information, such as traded corporate bonds, together with accounting and share price information related to the issuers of these bonds, are used in order to construct credit spread curves. These credit curves are used as an input to calculate the value of corporate bonds, but can also be used in the calculation of measures related to counterparty credit risk management like the probability of default and loss given default parameters. Currently there is no market standard model that can generate these credit curves. In this study, several models are introduced that may be appropriate to model credit spreads, as well as considerations for their application across a range of possible issuers. The accuracy of each model is tested by using these models to price newly issued corporate bonds and evaluating the resulting price difference from what is observed in the market.