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The credit spread is measured by comparing a company’s bond yields against those of Treasury notes with similar structure and term. If the bond’s credit spread rises above a predetermined level the contract pays out on a notional principal outstanding based on the difference between the actual spread and that defined in the contract. This » Read More
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Kalman offers an alternative approach to ARIMA, allowing an underlying forecasting model (message model) to be combined with other timely information (observation model). The message model may be any trading strategy, moving average. or regression approach. The observation model may be the floor broker’s opening calls, market liquidity’. or. in the case of existing foreign » Read More
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A common covenant is to require the company to pay its debtors before making a dividend payment. In many cases such restrictions are extended to cover actions such as share buy-backs and capital reduction programs. There is an intrinsic conflict between shareholder interests and creditor interests and banks need to protect themselves from action that » Read More