The Increasing Default Risk of U.S. Treasury Securities Due to the Financial Crisis
Time, Date, & Location
Date: Thursday, April 08, 2010
Time: 4:30 – 5p.m. Reception, 5 - 6p.m. Presentation and Discussion.
Location: Indiana State University
Where: College of Business, 11th Floor, 800 Sycamore Street, Terre Haute, Indiana 47809
Event Details:
Professor Stanley Smith will discuss the impact of the current financial crisis on long-term U.S. Treasury yields by testing the impact of a series of events from December 2007 to March 2009 on the spread between ten-year USD LIBOR swap and ten-year U.S. Treasury (constant maturity) rates to measure risk associated with Treasuries. Controlling for the liquidity of the two markets, the default risk of the swap, and the net foreign purchases of Treasury securities, he finds that thirteen of the tested twenty events have significantly negative coefficients. This implies that the standard assumption in international finance, that the United States is the default free security against which other sovereign nations are measured, is no longer true. He concludes that the lower spread is consistent with greater default risk for U.S. Treasury securities, which suggests a deteriorating credit rating for the U.S. Government and other U.S. borrowers, reduced credit availability for the U.S. government and private borrowers and higher interest rates.
Stanley D. Smith is a Professor of Finance at the University of Central Florida and served as a Visiting Professor of Finance at the Aarhus School of Business in Denmark and the University of Vaasa in Finland. Prior to joining UCF, he held other positions such as Professor of Finance, Dean of the College of Business, and Finance Department Head at the University of Arkansas, Fayetteville, Associate Professor of Finance at Emory University, and Instructor of Business at Colorado State University-Pueblo. He received a Ph.D. degree from Arizona State University and M.B.A. and B.B.A. degrees from the University of Oklahoma. Smith’s teaching has focused on commercial bank management and financial institutions and markets. He has an extensive record of publication and has provided consulting services or executive presentations to organizations globally. Smith currently serves on the Governing Board of the Financial Education Association.
This event is free, but reservations are required. Please reserve your spot by April 5th, 2010 with Marlene English at marlene.english@indstate.edu or 812-237-2011.
Park free in Lot 15 (accessible from 8th or 9th Streets). All campus parking is free after 5 pm in this lot and Campus Security is alerted to visitor parking in Lot 15 for this event prior to 5 pm. No parking tickets will be issued for guests in Lot 15.