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BEGIN:VEVENT
UID:7f8ed30c6e7fd27b101551d37a2efb73
CATEGORIES:Seminars
CREATED:20150211T174056
SUMMARY:Lunch Seminar: Giovanni Calice - University of Birmingham
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:<p style="text-align: justify;"><strong>A Markov Switching Unobserved Compo
 nent Analysis of the CDX Index Term Premium</strong></p><p style="text-alig
 n: justify;">Abstract</p><p style="text-align: justify;">Using a Markov swi
 tching unobserved component model we decompose the term premium of the Nort
 h American CDX investment grade index (CDX-IG) into a permanent and a stati
 onary component. We explain the evolution of the two components in relating
  them to monetary policy and stock market variables. We establish that the 
 inversion of the CDX index term premium is induced by sudden changes in the
  unobserved stationary component, which represents the evolution of the fun
 damentals underpinning the probability of default in the economy. We find s
 trong evidence that the unprecedented monetary policy response from the Fed
  during the 2008-2009 financial crisis period was effective in reducing mar
 ket uncertainty and helped to steepen the term structure of the index there
 by mitigating systemic risk concerns. The impact of stock market volatility
 , as captured by the VIX index, in flattening the term premium was substant
 ially more robust in the crisis period. We also show that equity returns ma
 ke a substantial contribution to the term premium over the entire sample pe
 riod.</p>
DTSTAMP:20260406T004015Z
DTSTART:20141022T130000Z
DTEND:20141022T140000Z
SEQUENCE:0
TRANSP:OPAQUE
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