Showing 1 - 10 of 17
We review different theoretical and empirical approaches for measuring the impact of liquidity on CDS prices. We start by reduced form models incorporating liquidity as an additional discount rate. We review Chen, Fabozzi and Sverdlove (2008) and Buhler and Trapp (2006, 2008), adopting different...
Persistent link: https://www.econbiz.de/10013133848
We develop a fixed income portfolio framework capturing the exponential decay of contagious intensities between successive default events. We show that the value function of the control problem is the classical solution to a recursive system of second-order uniformly parabolic...
Persistent link: https://www.econbiz.de/10012970968
of collateral mitigation. We show that the adjustment is given by the sum of option payoff terms, depending on the netted …
Persistent link: https://www.econbiz.de/10013086928
Persistent link: https://www.econbiz.de/10011710165
We introduce a dynamic credit portfolio framework where optimal investment strategies are robust against misspecifications of the reference credit model. The risk-averse investor models his fear of credit risk misspecification by considering a set of plausible alternatives whose expected log...
Persistent link: https://www.econbiz.de/10013001282
We develop a dynamic model of interbank borrowing and lending activities in which banks are organized into clusters, and adjust their monetary reserve levels to meet prescribed capital requirements. Each bank has its own initial monetary reserve level and faces idiosyncratic risks characterized...
Persistent link: https://www.econbiz.de/10012901154
We develop a tractable partial equilibrium model to analyze the impact on the bond market generated by a ban on naked credit default swaps. We demonstrate that such a ban will have a negligible impact on the borrowing costs if CDS speculators are risk averse and take positions which are small...
Persistent link: https://www.econbiz.de/10013077763
We consider the optimal portfolio problem of a power investor who wishes to allocate her wealth between several credit default swaps (CDSs) and a money market account. We model contagion risk among the reference entities in the portfolio using a reduced form Markovian model with interacting...
Persistent link: https://www.econbiz.de/10013062449
We obtain an explicit formula for the bilateral counterparty valuation adjustment of a credit default swaps portfolio referencing an asymptotically large number of entities.We perform the analysis under a doubly stochastic intensity framework, allowing for default correlation through a common...
Persistent link: https://www.econbiz.de/10013079139
We consider an optimal risk-sensitive portfolio allocation problem accounting for the possibility of cascading defaults. Default events have an impact on the distress state of the surviving stocks in the portfolio. We study the recursive system of non-Lipschitz quasi-linear parabolic HJB-PDEs...
Persistent link: https://www.econbiz.de/10012969492