Technical default risk

In the situation where the risk of a technical default risk is higher for credit default swaps than cash bonds. This results in protection sellers demanding a higher premium. For example, default swaps may be triggered by events that do not constitute a full default on the corresponding cash asset. 

A credit default swap (CDS) price provides fundamental credit risk information of a specific reference entity or asset. As explained before, asset swaps are used to transform the cash flows of a corporate bond for interest rate hedging purpose. Since the asset swaps are priced at a spread over the interbank rate, the ASW spread is the credit risk of the same one. However, market evidence shows that credit default swaps trade at a different level to asset swaps due to technical... 

American Industrial Hygiene Association (AHA) http //www.aiha.org/Pages/default.aspx (accessed October 14, 2010). Serving the needs of occupational and environmental health professionals practicing industrial hygiene, AHA s more than 30 technical committees deal with such concerns as exposure and risk assessment strategies, indoor environmental quality, workplace environmental exposure levels, noise hazards, and respiratory protection. Special events or services AHce annual conference, co-sponsored by AHA and ACGIH. Web site offers an electronic discussion list. 

The safe management of chemicals in the EU is based on the stepwise approach illustrated in Figure 23-3. In April 1996 a Technical Guidance Document was pub-lished to provide guidance on the risk assessment of both notified substances (as required under Commission Directive 93/67/EEC) and existing substances (under EC Regulation No. 1488/94) This guidance document deals with the risk assessment for human health and the environment, and covers also the use of (quantitative) structure-activity relationships. Of particular importance for the outcome of the risk assessment are the emission scenario documents, especially with respect to the default values, which will he applied if experimental data are not available. 

When a technical or actual default occurs, bondholders suffer losses as the value of their assets declines or, in the worst case, disappears entirely. The extent of credit risk varies with the fiscal condition of the borrowers and the health of the greater economy. The magnitude of... 

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