Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/337243 
Authors: 
Year of Publication: 
2022
Citation: 
[Journal:] Journal of Derivatives and Quantitative Studies: Seonmul yeon'gu (JDQS) [ISSN:] 2713-6647 [Volume:] 30 [Issue:] 2 [Year:] 2022 [Pages:] 74-88
Publisher: 
Emerald, Leeds
Abstract: 
This paper identifies the "idiosyncratic basis", the residual premia computed from stripping away the hypothetical cross-currency basis (CCB) from the cross-currency credit spread (CCCS) of eligible senior corporate dollardenominated bonds relative to their hypothetical euro-denominated comparator of identical seniority, duration, credit risk and issuer. The adherence of the idiosyncratic basis to the no-arbitrage condition is subsequently evaluated through the application of an indicative market-neutral credit strategy that is designed to harvest the apparent static arbitrage opportunities. The success of the strategy, which systematically captures the idiosyncratic basis as it adheres to the no-arbitrage conditions, is validated retrospectively to frame the basis as an additional class of alternative risk premia (ARP), which investors can seek to optimise exposure to in a long-only context.
Subjects: 
Fixed income
Covered interest rate parity
Alternative risk premia
Static arbitrage
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article

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