FRM二级基础段培训课件：案例（标准版）

FRM二级培训讲义-基础班Current

Issues2021FrameworkCurrent

IssuesBeyond

LIBORReplacing

LIBORMachine

LearningAIandMLinfinancialservicesClimateChange-PhysicalRiskandEquityTheGreen

SwanWhenSellingBecomesViralMarketsintheTimeof

COVID-19FinancialCrimeinTimesof

COVID-1910.CyberRiskandtheUSFinancialSystem购课后务必加唯一售后微信;xuebajun888s3-841.Beyond

LIBOR购课后务必加唯一售后微信;xuebajun888s4-84A.AnIdealReference

RateAnIdealReferenceRateNotsusceptibletomanipulation.Derivedfromactualtransactionsinliquidmarkets.Serveasabenchmarkforbothtermlendingand

funding.购课后务必加唯一售后微信;xuebajun888s5-84B.Problemswith

LIBORIssuesthatledtothereplacementof

LIBOR①Constructedfromasurveyofbanks

reporting.ThiscreatedamplescopeforpanelbankstomanipulateLIBORsubmissions.②Sparseactivityininterbankdeposit

markets.③Thedispersionofindividualbankcreditrisk.LIBORaimstocapturecommonbankrisk.④Regulatoryandthemarketwanttoreducecounterpartycreditriskininterbankexposures,bankshavealsotiltedtheirfundingmixtowardslessriskysourcesofwholesale

funding.购课后务必加唯一售后微信;xuebajun888s6-84C.SelectOvernightReference

RatesAlternativeRFRsinFiveCurrency

Areas购课后务必加唯一售后微信;xuebajun888s7-84C.SelectOvernightReference

RatesAlternativeRFRsinFiveCurrency

Areas购课后务必加唯一售后微信;xuebajun888s8-84D.RisksofRFRsintheRepo

MarketRisksofRFRsintheRepo

MarketO/Nreporatecannotreflectbank’smarginalfunding

costs.Banks’asset-liabilitymanagementis

challenging.Whenunderstress,reporatescanmoveintheoppositewayofunsecured

rates.TheforcesdrivingunsecuredO/Nrates(includingcreditrisk)pulledtheserateshigherastheunsecuredinterbankmarkets

froze.Atthesametime,theforcesdrivingsecuredO/NrateswerepullingthemlowerowingtoacollateralshortageandflighttosafetyForlongertenors,termratesbasedonnewRFRsarelikelytodeviatepersistentlyfromtheirLIBORcounterpartseveninnormal

times.TransitionIssues:themigrationoflegacyLIBOR-linkedexposurestothenewbenchmarksafter

2021.购课后务必加唯一售后微信;xuebajun888s9-842.Replacing

LIBOR购课后务必加唯一售后微信;xuebajun888s10-84A.The

FactsPublicationofLIBOR–theLondonInterbankOfferedRate–willlikelyceaseattheendof

2021.after2021,theFCAwouldnolongercompelreluctantbankstorespondtotheLIBOR

survey.then,theFCAcoulddeclareLIBORrates‘unrepresentative’offinancialrealityanditwill

vanish.购课后务必加唯一售后微信;xuebajun888s11-84B.RisksWhenLIBOR

EndsThesystemicriskposedbythecessationof

LIBOR.①Thefirstarisesfromthelegacycontractsreferencing

LIBOR.WhenpublicationofLIBORstops(orisexpectedtostop),contractsthatlackadequatefallbackprovisionsmayplungein

value.Totheextentthatlarge,leveragedintermediariesareexposed,theresultinglossescouldimpairtheircapital,leavingusinthedarkaboutwhichinstitutionsarehealthyandwhichare

not.②Thesecondissueiswhether,whenLIBORceases,therewillbean

adequatesubstitutethatallowsintermediariesbothtofundthemselves

inaliquidmarketandtoprovidecredit.购课后务必加唯一售后微信;xuebajun888s12-84C.Current

ProblemsWheredothingsstand

now?First,thereremainplentyofdollarLIBORlegacycontracts

outstanding.thelatestavailabledataarenearlythreeyearsold,andtheindustrycontinuestocreateLIBOR-linkedcontracts,westronglysuspectthatthesenumbersunderstatethe

challenge.Second,thereisnocentralrepositoryprovidinginformationaboutwhat,ifany,fallbacklanguageexistsinthesecontracts.WithoutLIBOR,whathappens?Inadequatefallbacklanguagefostersuncertaintyaboutthevalueoftheassets,andcouldtriggerawaveof

lawsuits.Third,whiletheprocessofcreatingasatisfactoryreplacementfordollarLIBORiswelladvanced,itisfarfrom

complete.Thereislittletimefor

testing.购课后务必加唯一售后微信;xuebajun888s13-84D.TheGovernment’sRoleinthe

TransitionFourveryimportantrolesforgovernment

officials.①Thegreaterthecertaintyabouttheenddate,thefastertheLIBORtransitionwillbe.Authoritiescanfurtherintensifywarningsaboutthe

imprudenceofrelyingon

LIBOR.②Supervisorsmustensurethatallsystemicallyimportantbanksandfinancialmarketutilitiesarefully

prepared.③Thereremainsaremarkableabsenceofup-to-datedataonLIBOR-linked

instruments.购课后务必加唯一售后微信;xuebajun888sregulatorsshouldgatherandpublishdatashowingtheevolution

ofLIBORexposure(includinginformationonfallbacklanguage)atleastquarterly.④BecausetheLIBORtransitionwilldirectlyaffectmanyhouseholdsandsmallbusinesseswithLIBOR-linkeddebt,itisimportantforauthorities(includingtheConsumerFinancialProtectionBureau)topromotepublicawarenessofthechanges

underway.购课后务必加唯一售后微信;xuebajun888s14-843.Machine

Learning购课后务必加唯一售后微信;xuebajun888s15-84A.

IntroductionTheDriving

ForcesMoredetailsof

reporting.High-frequency,unstructuredlowqualityconsumer

data.Big

dataPredictionversus

ExplanationStatisticalmethodsaregoodforexplanation.MLisgoodfor

prediction.购课后务必加唯一售后微信;xuebajun888s16-84B.Backgroundto

MLSupervised

LearningDependentvariableyis

known.Unsupervised

LearningDependentvariableyis

lacking.购课后务必加唯一售后微信;xuebajun888s17-84B.Backgroundto

MLMachineLearning

MethodsRegressionAsupervisedML

problem.Topredictacontinuousdependentvariable

y.Afactorisaddedtopenalisecomplexityinthe

model.ClassificationAdiscrete

problem.ClusteringAnunsupervisedML

problem.购课后务必加唯一售后微信;xuebajun888s18-84B.Backgroundto

MLOverfittingFitthedatasamplevery

well.Performpoorlywhentested

out-of-sample.Havingtoomany

parameters.WaystoDealwith

OverfittingBoosting:overweightscarcerobservationsinatraining

dataset.Bagging:amodelisrunthousandsoftimes,eachona

differentsubsampleofthe

dataset.Averageallthe

runs.Randomforest:amodelconsistingofmanydifferentdecision

trees.Ensemble:averagetheresultingmodelwithmanyotherML

models.购课后务必加唯一售后微信;xuebajun888s19-84C.ThreeUseCases①CreditRiskandRevenue

ModelingDifficultiesin

UsageModelscanbesensitivetooverfittingthe

data.Hardforanyhumantounderstand.②

FraudDetectionofCreditCard

FraudClearhistoricaldatawithrelevantfraudlabelstotrain

classification.③SurveillanceofConductandMarketAbusein

TradingApplication:Monitorthebehaviourof

traders.ChallengestoApplyingMLNolabeleddatatotrain

algorithms.Blackboxes:hardtoexplaintoacompliance

officer.Countermeasure:incorporateshuman

decisions.BarriertotheImplementationofAutomated

SurveillanceInformationfromdifferentsourcescouldbemutually

incompatible.购课后务必加唯一售后微信;xuebajun888s20-844.AIandMLinFinancial

Services购课后务必加唯一售后微信;xuebajun888s21-84A.Backgroundand

definitionsAschematicviewofAI,machinelearningandbigdata

analytics购课后务必加唯一售后微信;xuebajun888s22-84B.

DriversAvarietyoffactorsthathavecontributedtothegrowinguseofFinTechgenerallyhavealsospurredadoptionofAIandmachinelearninginfinancialservices.购课后务必加唯一售后微信;xuebajun888s23-84C.SelectedFourUse

Cases①Customer-focused

UsesCreditScoring

ApplicationsUseforPricing,MarketingandManagingInsurance

PoliciesClient-facing

Chatbots②Operations-focused

UsesCapitalOptimisationUseCaseModelRiskManagementandStress

TestingMarketImpact

Analysis购课后务必加唯一售后微信;xuebajun888s24-84C.SelectedUse

Cases③TradingAndPortfolio

ManagementAIMLinTrading

ExecutionScopefortheUseofAIMLinPortfolio

Management.④AIMLInRegulatoryComplianceAnd

SupervisionRegTech:ApplicationsbyFinancialInstitutionsforRegulatoryCompliance.UsesforMacroprudentialSurveillanceandDataQuality

Assurance.SupTech:UsesandPotentialUsesbyCentralBanksandPrudentialAuthorities.UsesbyMarketRegulatorsforSurveillanceandFraud

Detection.购课后务必加唯一售后微信;xuebajun888s25-84D.Micro-financial

AnalysisPossibleEffectsOfAIMLonFinancial

MarketsImprovementCollectandanalyseinfoonagreater

scale.Lowertradingcosts.ConcernsSimilarAIMLprogrammes=>correlated

risks.Couldbeusedbyinsiderstomanipulate

market.购课后务必加唯一售后微信;xuebajun888s26-84D.Micro-financial

AnalysisPossibleEffectsofAIMLonFinancial

InstitutionsBenefitingSystem-wide

StabilityIncreaserevenuesandreduce

costs.Earlierandmoreaccurateestimationof

risks.Collaborationbetweenfinancialinstitutionsandother

industries.DrawbacksMissnewtypesof

risks.Blackboxesin

decision-making.Forintermediaries:alackofclarityaround

responsibility.Third-party

dependencies.购课后务必加唯一售后微信;xuebajun888s27-84D.Micro-financial

AnalysisPossibleEffectsofAIMLonConsumersand

InvestorsANumberof

BenefitsConsumers:lowerfeesandborrowing

costs.Wideraccesstofinancial

services.Facilitatemorecustomisedfinancial

services.ConcernsDataprivacyandinformationsecurity.Avoidingdiscrimination.购课后务必加唯一售后微信;xuebajun888s28-84E.Macro-financialAnalysisMarketConcentrationandSystemicImportanceof

InstitutionsAffectthedegreeof

concentrationAsmallnumberofadvancedthird-party

providers.Technologiesaffordableonlytolarge

companies.Reducethesystemicimportanceoflargeuniversal

banks.Universalbanks’vulnerabilitytosystemicshocksmay

grow.Networksand

InterconnectednessGreaterinterconnectednessinthefinancial

system.Helptoshare

risks.Butalsospreadtheextreme

shocks.购课后务必加唯一售后微信;xuebajun888s29-84E.Macro-financial

AnalysisPotentialMarket

VulnerabilitiesGreaterdiversityinmarket

movements.Lesspredictabletrading

algorithms.Increase

liquidity.Moreeffectivehedging

strategies.Reducerelianceonbankloans.Minimisecapital=>morerisk.OtherImplicationsOfAIML

ApplicationsReducethedegreeofmoralhazardandadverse

selection.Higherpremiumsforriskier

consumers.Entail

biases.ForRegTechand

SupTech‘Game’regulatory

rules.购课后务必加唯一售后微信;xuebajun888s30-845.ClimateChange

-PhysicalRisk

andEquity购课后务必加唯一售后微信;xuebajun888s31-84A.

IntroductionTheprojectedincreaseinthefrequencyandseverityofdisastersduetoclimatechangeisapotentialthreattofinancial

stability.Extremeweatherevents—orclimatichazards—canturnintodisastersthatcauselossoflifeandcapitalstock,aswellasdisruptionstoeconomicactivity.thereactionsofeconomicagents(includinggovernments)tothesechanges,inparticularthrough

adaptation.transitionriskresultingfrompolicy,technology,legal,andmarketchangesthatoccurduringthemovetoalow-carbon

economy.购课后务必加唯一售后微信;xuebajun888s32-84B.PhysicalRiskandFinancial

StabilityFromtheperspectiveofphysicalrisk,climatechangecanaffectfinancialstabilitythroughtwomain

channels.①First,currentclimaticdisastersaffectcredit,underwriting,market,operational,andliquidity

risks.②Second,theshiftsinexpectationsandattentionaboutfutureclimaticdisasterscanaffectassetvaluestoday.购课后务必加唯一售后微信;xuebajun888s33-84Theimpactonequitypricescaninformfinancialstabilityassessmentsforatleasttwo

reasons.①widespreaddestructionoffirms’assetsandproductivecapacityora

dropindemandfortheir

products.②thereactionofthestockpricesoffinancialinstitutionsprovidesasummarymeasureoftheextenttowhichtheseinstitutionsareaffectedby

disasters.anopportunitytoincreaseunderwritingvolumesandpremiums

forinsurance

companies.C.PhysicalRiskandEquity

Prices购课后务必加唯一售后微信;xuebajun888s34-84C.PhysicalRiskandEquity

PricesEmpirical

evidence:购课后务必加唯一售后微信

xuebajun888s①onaverage,therehasbeenonlyamodestresponseofstockpricestolargeclimatic

disasters.Results,however,varyconsiderablyacross

disasters.HurricaneKatrina(2005)v.s.the2011floodsin

Thailand.②Amongfinancialsectorfirms,largedisastershaveastatisticallysignificanteffect

onthereturnsofnon–lifeinsurersinadvancedeconomies,butnosignificantreactioninemergingmarketanddeveloping

economies.apossiblereason:alargeshareofinsuranceinemergingmarketanddevelopingeconomiesisprovidedbysubsidiariesofinsurerslisted

abroad.购课后务必加唯一售后微信;xuebajun888s35-84D.InsurancePenetrationandSovereignFinancial

StrengthRegardlessofthesizeoffutureclimaticshocks,insurancecoverageandsovereignfinancialstrengthwillbekeyfactorsinmaintainingfinancialstability.Insurance

penetrationRisk-sharing

mechanisms.E.g.insurance,weatherderivatives,andcatastrophe

bonds.Sovereignfinancial

strengthIncreasetheabilityofthegovernmenttorespondtodisastersthroughfinancialreliefandreconstruction

efforts.Increaseitscapacitytooffersomeformsofexplicitinsuranceprograms.购课后务必加唯一售后微信;xuebajun888s36-846.TheGreen

Swan购课后务必加唯一售后微信;xuebajun888s37-84A.BlackSwanandGreen

SwanBlackswaneventshavethree

characteristics①theyareunexpectedandrare,therebylyingoutsidetherealmofregularexpectations;②theirimpactsarewide-rangingor

extreme;③theycanonlybeexplainedafterthe

fact.OthercharacteristicsofBlackswan

eventsTakemanyshapes,fromaterroristattacktoadisruptivetechnologyoranatural

catastrophe.Theseeventstypicallyfitfattailedprobability

distributions,cannotbepredictedbyrelyingonbackward-lookingprobabilisticapproachesassumingnormaldistributions(eg.value-at-risk

models).Suchanepistemologicalpositioncanprovidesomeformofhedgingagainstextremerisks(turningblackswansinto“grey”ones)butnotmakethem

disappear.购课后务必加唯一售后微信;xuebajun888s38-84A.BlackSwanandGreen

SwanGreenswans,or“climateblackswans”,presentmanyfeaturesoftypicalblack

swans.Climate-relatedriskstypicallyfitfat-tailed

distributions.theirchancesofoccurrencearenotreflectedinpastdata,andthepossibilityofextremevaluescannotberuled

out.assessingclimate-relatedrisksrequiresan“epistemologicalbreak”withregardtorisk

management.购课后务必加唯一售后微信;xuebajun888s39-84A.BlackSwanandGreen

SwanGreenswansaredifferentfromblackswansinthree

regards.①First,althoughtheimpactsofclimatechangearehighlyuncertain,thereisahighdegreeofcertaintythatsomecombinationofphysicaland

transitionriskswillmaterializeinthe

future.②Second,climatecatastrophesareevenmoreseriousthanmostsystemic

financial

crises.③Third,thecomplexityrelatedtoclimatechangeisofahigher

orderthanforblack

swans.购课后务必加唯一售后微信;xuebajun888s40-84B.Monetary

InstabilityClimate-relatedshocksarelikelytoaffectmonetarypolicythroughsupply-sideanddemand-sideshocks,andtherebyaffectcentralbanks’pricestability

mandate.Supply-side

shockspressuresonthesupplyofagriculturalproductsandenergyareparticularlypronetosharppriceadjustmentsandincreased

volatility.reduceeconomies’productive

capacity.Demand-sideshocksreducinghouseholdwealthand

consumption.Climatemitigationpoliciescouldalsoaffectinvestmentinsomesectors.Insum,theimpactsofclimatechangeoninflationareunclear

partlybecauseclimatesupplyanddemandshocksmaypullinflationandoutputinoppositedirections,andgenerateatrade-offforcentralbanksbetweenstabilisinginflationandstabilisingoutput

fluctuations.购课后务必加唯一售后微信;xuebajun888s41-84B.Monetary

InstabilityTraditionally,ifthereisapresumptionthattheimpactistemporary,theresponsecanbetowaitandseeasitdoesnotaffectpricesandexpectationsonapermanent

basis.However,climate-relatedshockhasmorelastingeffects,therecouldbemotivestoconsiderapolicyreaction,however,thereareatleastthreechallenges.①Climatechangeisexpectedtomaintainitstrajectoryforlongperiodsof

time(cyclicalinstrumentscanleadtostagflationarysupplyshocksthatmonetarypolicymaybeunabletofully

reverse).②Climatechangeisaglobalproblemthatdemandsaglobalsolution,whereasmonetarypolicyseems,currently,tobedifficulttocoordinatebetweencountries

.③Evenifcentralbankswereabletore-establishpricestabilityafteraclimate-relatedinflationaryshock,thequestionremainswhetherthey

wouldbeabletotakepre-emptivemeasures

tohedgeexanteagainstfat-tailclimate

risks.购课后务必加唯一售后微信;xuebajun888s42-84C.FinancialInstabilityClimate-relatedrisksareasourceoffinancialrisk.

Therearetwomainchannelsthroughwhichclimatechangecanaffectfinancial

stability.Physicalrisks:are“thoserisksthatarisefromtheinteractionofclimate-relatedhazards[…]withthevulnerabilityofexposuretohumanandnatural

systems”.Transitionrisk:areassociatedwiththeuncertainfinancialimpactsthatcouldresultfromarapidlow-carbontransition,includingpolicychanges,reputationalimpacts,technologicalbreakthroughsorlimitations,andshiftsinmarketpreferencesandsocial

norms.购课后务必加唯一售后微信;xuebajun888s43-84C.FinancialInstabilityPhysical

risks①Thedestructionofcapitalandthedeclineinprofitabilityofexposedfirmscouldinduceareallocationofhouseholdfinancial

wealth.②affecttheexpectationoffuturelosses,whichinturnmayaffectcurrentriskpreferences.③non-insuredlossescanthreatenthesolvencyofhouseholds,businessesandgovernments,andthereforefinancialinstitutions.Insuredlosses,mayplaceinsurersandreinsurersinasituationoffragilityasclaimsfordamageskeep

increasing.④increasedspeedofcapital

depreciation.⑤mightnothavesufficientcapitaltoabsorbclimate-relatedlossesaspossibilityofextremevaluescannotberuled

out.购课后务必加唯一售后微信;xuebajun888s44-84C.Financial

InstabilityTransition

riskArapidandambitioustransitiontoloweremissionspathwaysmeansthatalargefractionofprovenreservesoffossilfuelcannotbeextracted,becoming“stranded

assets”.Moreover,thevalueaddedofmanyothereconomicsectors

dependentonfossilfuelcompanieswillprobablybeimpactedindirectlybytransition

risks.

Forinstance,theautomobileindustrymaybestronglyimpacted

astechnologies,pricesandindividualpreferences

evolve.购课后务必加唯一售后微信;xuebajun888s45-84C.FinancialInstabilityPhysicalandtransitionrisksareusuallyassessedseparately,giventhecomplexityinvolvedineachcase.However,theyshouldbeunderstoodaspartofthesameframeworkandasbeing

interconnected.购课后务必加唯一售后微信;xuebajun888s46-84C.FinancialInstabilityPhysicalandtransitionriskscanmaterialiseintermsoffinancialriskinfivemainways,withmanysecond-roundeffectsandspillovereffectsamongthem.购课后务必加唯一售后微信;xuebajun888s47-84D.Policy

ResponsesCentralbanksmustalsobemoreproactiveincallingforbroaderandcoordinatedchange,inordertocontinuefulfillingtheirownmandatesoffinancialandpricestabilityoverlongertimehorizonsthanthosetraditionally

considered.theycanbestcontributetothistaskinarolethatwecallthefiveCs:contributetocoordinationtocombatclimate

change.Thiscoordinatingrolewouldrequirethinkingconcomitantlywithinthreeparadigmaticapproachestoclimatechangeandfinancialstability:①

risk②time

horizon③system

resilience购课后务必加唯一售后微信;xuebajun888s48-84D.Policy

Responses①The

risks购课后务必加唯一售后微信;xuebajun888s49-84D.Policy

Responses②Thetime

horizon购课后务必加唯一售后微信;xuebajun888s50-84D.Policy

Responses③Thesystem

resilience购课后务必加唯一售后微信;xuebajun888s51-847.When

SellingBecomes

Viral购课后务必加唯一售后微信;xuebajun888s52-84A.AggregateChangesinDebt

PricesPricemovementsduringtheCOVID-19

crisis.购课后务必加唯一售后微信;xuebajun888s53-84A.AggregateChangesinDebt

PricesComparingwiththeGreatFinancialCrisisof

2008-2009购课后务必加唯一售后微信;xuebajun888s54-84A.AggregateChangesinDebt

PricesHowabnormalaretheprice

movements?Thepricedropsforcorporatedebt,whilesmallerintermsofabsolutesize,areofsameorderofmagnitudeasthestock

market.ComparingwiththeGreatFinancialCrisisof2008-2009.SimilarityIntermsofmagnitude,thiscomparisonhighlightsthattheMarch2020declineinpricesiscomparabletotheworsthistoricalepisodes.However,thetwoepisodesdifferonacoupleofimportantdimensions.DifferencesInthe2008episode,high-yieldbondscloselytrackthestockmarket,whileinvestmentgradedeclinesbymuch

less.Anothersalientaspectistheextremelyhighspeedatwhichassetpricemovementstakeplaceintherecent

episode.购课后务必加唯一售后微信;xuebajun888s55-84B.DisruptionsinthePricingof

DebtSynchronizationof

DislocationsCDS-Bond

BasisAnegativebasisindicatesthatthebondischeaprelativetoaportfoliothatapproximatelyreplicatesthebondcash-flowwithtreasuriesandtheCDS.Whilethisimplementationisnotanexactarbitragetrade,themagnitudeofthebasiswedocumentappearsdifficulttoreconcilewithfrictionless

pricing.ETF-NAVBasisTheusuallymoreliquidETFbecomescheaperthanitsmoreilliquidcounterpart,thebondportfolio.Thedistancebetweenthetwoislarge,withtheETFtradingat5%lowerthanthereportedvalueoftheunderlyingbond

portfolio.ThisdeviationrepresentsaboutaquarteroftheoverallpricedropfortheETFduringthis

period.ComparingthevariousETFsallowsustoruleoutmoremechanicalinterpretationsofthebasis.OnesuchinterpretationisthatpricesusedtocomputetheNAVaresomewhat

stale.购课后务必加唯一售后微信;xuebajun888s56-84C.TheEffectoftheFed’s

InterventionsTheFederalReserve’sInterventionsinDebt

Markets购课后务必加唯一售后微信;xuebajun888s57-84C.TheEffectoftheFed’s

InterventionsEventStudyAroundPolicy

Announcements①Debt

Prices.Theannouncementofpurchasesofinvestment-gradebondsonMarch23increasesthepriceoftheinvestment-gradeETFby6%.Thisdiscreteshiftupstandsincontrasttostocksorhigh-yieldbonds,thatdonotseeany

movement.ThedramaticexpansionofthebondpurchaseprogramsonApril9alsohasalargeimpactonprices,butwithaverydifferentempiricalsignature.Weobserveastrongrecoveryacrossmarkets,witharesponsemoreinlinewith

riskiness.购课后务必加唯一售后微信;xuebajun888s58-84C.TheEffectoftheFed’s

InterventionsEventStudyAroundPolicy

Announcements②CreditDefault

Swaps.WecomplementthisanalysisbylookingattheresponseofCDSspreads,usinghigh-frequencyvariationintheinvestment-gradeandhigh-yieldCDX

baskets.Forbothdates,weseethatCDSspreadsstayinlinewiththeleveloftheprevioustradingdayintheearlyhoursofthemorning.Theythenjumpdownrightaftertheannouncements,inlinewithourhypothesisthattheFedreleasesarewhattriggeredthesharppricemovements.Asecondadvantageofconsideringthisdataisthatithelpsseparatewhethertherecoveryaftertheannouncementoccursthroughoutcreditinstruments,orreflectsaclosureof

disruptions.购课后务必加唯一售后微信;xuebajun888s59-84D.ExplanationsofPrice

MovementsWhatExplainsthePriceMovementsinDebt

Markets?Frictionlessviewsofassetmarketsfocusingoncashflowandeconomy-wideriskpremiumeffectscannoteasilyexplainthedisruptionsindebtmarketswehave

documented.Theoriesoffinancialfrictionsandlimitstoarbitrageshowmorepromise,buthereaswellourevidencehelpsdifferentiatevariousmechanisms.购课后务必加唯一售后微信;xuebajun888s60-84D.ExplanationsofPrice

MovementsFrictionlessExplanationsFundamental

distressAfirstexplanationforthedropinpriceexperiencedacross

marketsisthatexpectedpayoffsoftheassetshavedramatically

decreased.Risk

compensationsIfbondpricesdidnotdropduetoafallincash-flowexpectations,ithastobethatbondshadhighexpectedreturnslooking

forward.

购课后务必加唯一售后微信;xuebajun888s61-84D.ExplanationsofPrice

MovementsFinancial

FrictionsThesetheoriesarepromisingbecausetheyentertaindeviationsfromthelawofonepriceandcangenerateamplificationeffectsthatleadpricesinsomemarketstodepartfrom

fundamentals.Wediscussfirstthenatureofwhatpreventeddealersfromsteppingin,thentheoriginsoftheselling

pressure.Dealers,facingtheirownconstraints,areunabletoabsorbthissellingpressureuntiltheycanfindinvestorswillingtobuytheassetsatareasonable

valuation.Somemarketsfacespecificfinancialconstraintsthatpromptsthemtoliquidateacertainsubsetofpositions.Investorsspecializeindifferentsetsofsecuritie