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Standard & Poor’s Downgrades Itv To Junk Status

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http://business.timesonline.co.uk/tol/busi...icle4474469.ece

It has drawn widespread criticism, even ridicule, for broadcasting down-market fare such as The Jeremy Kyle Show, but yesterday ITV slumped even in the eyes of the financial credit raters when Standard & Poor’s down-graded the broadcaster to junk status.

The decision, taken after ITV had predicted a 20 per cent collapse in advertising next month, means that ITV will be forced to pay £8 million a year more in interest to service its debt – the cost of 12 hours of high-quality drama or 80 editions of Jeremy Kyle – as the credit crunch hits advertising at Britain’s most-watched commercial broadcaster.

“There’s been a lag between the dip in the economy and us feeling it,” Michael Grade, the executive chairman, said as he sought to portray the fall-off in bookings as isolated. “Advertisers are probably saving now and planning to spend later – that’s the commonsense observation rather than an empirical one”.

ITV, reporting interim results, said that advertising revenues were up 1 per cent in the first six months of the year and had held up over the summer before the September plunge. However, Mr Grade said that the crucial Christmas months may not suffer such severe declines.

I wonder how much of ITV revenue has been down to MEWing?

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Boring fact #1. ITV is a member of the ITRAXX S9 Xover index, so its downgrading has an effect, albeit minor, on structured credit products that have the XOver as their underlying, as they allow certain leverage dependent on the rating of the underlying.

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Boring fact #1. ITV is a member of the ITRAXX S9 Xover index, so its downgrading has an effect, albeit minor, on structured credit products that have the XOver as their underlying, as they allow certain leverage dependent on the rating of the underlying.

I think "interesting, but in need of a tad more explaining" would be closer.

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I think "interesting, but in need of a tad more explaining" would be closer.

Say you have a product like

http://en.wikipedia.org/wiki/Constant_prop...folio_insurance

"Rules

If the gap remains between an upper and a lower trigger band (resp. releverage and deleverage triggers), the strategy does not trade. It effectively reduces transaction costs, but the drawback is that whenever a trade event to reallocate the weights to the theoretical values happen, the prices have either shifted quite a bit high or low, resulting in the CPPI effectively buying (due to releverage) high, and selling low."

the target leverage is dependent on several things, the underlying being one of them. One type of underlying is an ITRAXX index, containing a numble of single name corporate CDS. The effect of a downgrade is very minor as there are typically a lot of names in the index(s) you have as part of the CPPI. Not sure if my explanation is any good.

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Say you have a product like

http://en.wikipedia.org/wiki/Constant_prop...folio_insurance

"Rules

If the gap remains between an upper and a lower trigger band (resp. releverage and deleverage triggers), the strategy does not trade. It effectively reduces transaction costs, but the drawback is that whenever a trade event to reallocate the weights to the theoretical values happen, the prices have either shifted quite a bit high or low, resulting in the CPPI effectively buying (due to releverage) high, and selling low."

the target leverage is dependent on several things, the underlying being one of them. One type of underlying is an ITRAXX index, containing a numble of single name corporate CDS. The effect of a downgrade is very minor as there are typically a lot of names in the index(s) you have as part of the CPPI. Not sure if my explanation is any good.

Ahh... I see...

So the price band differential trigger shift is inversely proportional to the underlying index downgrade effect.

That will make investing so much easier.

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A hurricane triggered by butterfly wings.

Looks like wave #2 is starting - coporate downgrades/ defaults (and the indelibly associated rise in unemployment).

Hang on to your hats, lads.

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  • 401 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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