Document Type thesis Author Name Jiang, Qizhong URN etd-050213-111018 Title Risk Analysis for Corporate Bond Portfolios Degree MS Department Mathematical Sciences Advisors Marcel Blais, Advisor Keywords market risk credit risk liquidity risk value at risk Fama-French multi-factor model Date of Presentation/Defense 2013-05-02 Availability unrestricted
This project focuses on risk analysis of corporate bond portfolios. We divide the total risk of the portfolio into three parts, which are market risk, credit risk and liquidity risk. The market risk component is quantified by value-at-risk (VaR) which is determined by change in yield to maturity of the bond portfolio. For the credit risk component, we calculate default probabilities and losses in the event of default and then compute credit VaR. Next, we define a factor called `basis' which is the difference between the Credit Default Swap (CDS) spread and its corresponding corporate bond yield spread (z-spread or OAS). We quantify the liquidity risk by using the basis. In addition we also introduce a Fama-French multi-factor model to analyze the factor significance to the corporate bond portfolio.
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