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RELATIONSHIP BETWEEN COUNTERPARTY RISK, STOCK MARKET, OIL PRICES, HOME PRICES, AND EXCHANGE RATES
Keywords: 5 words maximum
TED, Counterparty Risk, Credit Risk
Very short description for use in the program to help attendees understand more than a title can describe
From mid-2007, the global financial system faced what has come to be termed as the worst financial crisis since the Great Depression. During the same time, financial asset valuation witnessed unusually high activity in their risk spread and volatility. In addition, spread between the U.S. T-bill rate and the LIBOR rate, termed as TED spread and considered a proxy for perceived counterparty risk, also widened during the crisis period. In this paper we analyze whether the TED spread (Treasury-Eurodollar spread) has an impact on stock market returns, oil prices, exchange rates, and home values. Results from our study indicate that the TED spread has a negative and significant impact on Dow Jones Industrial Average and the spot oil prices, a mixed albeit significant impact on U.S. 10 metropolitan home prices. We did not find evidence of a significant impact of TED spread on U.S. Dollar exchange rate.
Lead & Corresponding Author
Dr Akash Dania, Ph.D., Alcorn State University
Job Title
Associate Professor of Finance