Corporate credits

For example, let us assume that we have a 5-year credit default swap spread on a corporate credit which is 60 bps p.a. 

In constructing our hypothetical portfolio of corporate credits, we first identify a suitably diversified list of names that meet our rating and spread requirements. 

However, rating is not the only criterion for the selection of companies. To analyse corporate credit quality in isolation, other risks such as country risk should be ruled out. Corporations should only differ in their credit quality. Otherwise, they should be as homogeneous as possible. For this reason, rating models for different industries (such as, for example, industrial, telecommunications or utility companies) have been developed as different industries may differ in terms of the competitive situation, profit determinants, and balance sheet ratios. This makes it necessary to analyse at first the business risks of an industry as well as to compare and assess the corporations within this industry on the basis of the criteria established. 

The index tranche product is an OTC derivative market and a pure synthetic form of corporate credit CDO exposure. The tranche market has been established so that the trade is a bilateral contract between the dealer and the investor. The term single tranche synthetic CDO is often used to describe an index tranche exposure. However, as a result of the contract, the dealer is exposed to the risk (credit, market, and operational) of managing the contract. 

In addition to specific deductions and credits, the Tax Code permits state and local governments to issue bonds on which the interest is exempt from federal income tax. This provision means that states and local governments can borrow at interest rates below those paid by private corporations. Municipally owned electricity providers often can issue tax-exempt debt the lower interest rate may have the effect of increasing the provision of electricity by these entities. 

Wei JZ (2003) A multi-factor, credit migration model for sovereign and corporate debts. J Int Money Finance 22 709-735... 

FORMER U.S. DEPARTMENT OF AGRICULTURE/COMMODITY CREDIT CORPORATION GRAIN BIN PROJECT 107... 

The Commodity Credit Corporation (CCC) initiated a large-scale grain bin construction program in the late 1940 s for the purpose of storing surplus grain. These temporary facilities were used intermittently in areas where... 

They are supported by federal solar power tax credits along with California s Public Utilities Regulatory Policy Act (PURPA) contracts and renewable power subsidies. When these tax credits were interrupted for eleven months in 1991, the plants operator, LUZ, immediately went bankrupt then SEGS, an Israeli government corporation, took over operation. 

Governments in the industrialized world are quick to respond to pressure from pharmaceutical corporations aimed at putting public funds to work in the service of private wealth. Some of the instruments deployed toward this end include the patent system, tax credits, R D grants, and subsidies from national healthcare systems. This is not to argue that such incentives are bad per se rather, they must be called into question when they are offered without regard to their ultimate social utility. 

The costs of debt can generally be deduced from the terms of credit contracts or corporate bonds issued by the company. Alternatively, if a credit rating is available, the interest rate corresponding to the credit rating of the company can be used (cf. Koller et al. 2005, pp. 319-320). 

Using credit cards is another common example of consumer credit. Credit cards allow people to make purchases even when they may not have enough cash on hand to pay for them. Many people feel more comfortable making purchases on credit cards instead of carrying large amounts of cash. In addition, they are a convenient way to consolidate individual purchases into one single monthly payment. Many large corporations... 

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