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UID:7f8ed30c6e7fd27b101551d37a2efb73
CATEGORIES:Seminars
CREATED:20150211T174056
SUMMARY:Lunch Seminar: Giovanni Calice - University of Birmingham
DESCRIPTION;ENCODING=QUOTED-PRINTABLE:A Markov Switching Unobserved Component Analysis of the CDX Index Term Prem
 ium\nAbstract\nUsing a Markov switching unobserved component model we decom
 pose the term premium of the North American CDX investment grade index (CDX
 -IG) into a permanent and a stationary 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 re
 presents the evolution of the fundamentals underpinning the probability of 
 default in the economy. We find strong evidence that the unprecedented mone
 tary policy response from the Fed during the 2008-2009 financial crisis per
 iod was effective in reducing market uncertainty and helped to steepen the 
 term structure of the index thereby mitigating systemic risk concerns. The 
 impact of stock market volatility, as captured by the VIX index, in flatten
 ing the term premium was substantially more robust in the crisis period. We
  also show that equity returns make a substantial contribution to the term 
 premium over the entire sample period.\n
DTSTAMP:20260406T003334Z
DTSTART:20141022T130000Z
DTEND:20141022T140000Z
SEQUENCE:0
TRANSP:OPAQUE
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