Knowledge that Transforms

In this book, two of America's leading economists provide the first integrated treatment of the conceptual, practical, and empirical foundations for credit risk pricing and risk measurement. Masterfully applying theory to practice, Darrell Duffie and Kenneth Singleton model credit risk for the purpose of measuring portfolio risk and pricing defaultable bonds, credit derivatives, and other securities exposed to credit risk. The methodological rigor, scope, and sophistication of their state-of-the-art account is unparalleled.

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An abstract is not available for this content so a preview has been provided. As you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

An abstract is not available for this content so a preview has been provided. As you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

An abstract is not available for this content so a preview has been provided. As you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

An abstract is not available for this content so a preview has been provided. As you have access to this content, a full PDF is available via the ‘Save PDF’ action button.

We use a unique set of equities in the when-issued market to provide new tests of the law of one price in financial markets. We compare the prices of when-issued and regular-way shares of publicly-traded subsidiaries and their parents around the time the subsidiaries are fully divested. In contrast to prior analyses of when-issued trading in equity markets, we find that the when-issued shares of the subsidiary trade at a discount. Some of the pricing differences stem from measurement factors such as exchange location and bid-ask clustering that bias the observed when-issued pricing differential away from zero. The remaining difference between the when-issued and regular-way prices is due to asymmetric movements in bid and ask quotes in the two markets. We also find evidence of temporary price pressures on the date of execution of the spinoff of the subsidiary firms that bear resemblance to the pricing in the when-issued market. We interpret the evidence as consistent with the law of one price in the presence of transaction costs.

An abstract is not available for this content so a preview has been provided. As you have access to this content, a full PDF is available via the ‘Save PDF’ action button.