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Bank Stability and Market Discipline: Debt-for-Equity Swap versus Subordinated Notes

Raviv, Alon - EconWPA - 2004

fixed income unless the value of the bank’s assets falls below a predetermined threshold. In such an event, the debt … obligation is automatically converted to the bank’s common equities. By using a contingent claims valuation approach we present … bank that includes DES or alternatively subordinated debt in its capital structure. We compare and evaluate quantitatively …

Persistent link: https://www.econbiz.de/10005413031

From Default Probabilities To Credit Spreads: Credit Risk Models Do Explain Market Prices

Denzler, Stefan; Dacorogna, Michel M.; Mueller, Ulrich A.; … - EconWPA - 2005

Credit risk models like Moody’s KMV are now well established in the market and give bond managers reliable estimates of default probabilities for individual firms. Until now it has been hard to relate those probabilities to the actual credit spreads observed on the market for corporate bonds....

Persistent link: https://www.econbiz.de/10005077017

Proxying for Expected Returns with Price Earnings Ratios

Hansen, Charlotte S.; Tuypens, Bjorn E. - EconWPA - 2004

Long-run regression models using the trailing earnings over price ratio to predict future returns suggested by Campbell and Shiller (1988, 2001) work quite well. However, in this note we show that this variable might result in a downward biased proxy for expected future returns. Instead we...

Persistent link: https://www.econbiz.de/10005134659

What Type of Process Underlies Options? A Simple Robust Test

Carr, Peter; Wu, Liuren - EconWPA - 2002

We develop a simple robust test for the presence of continuous and discontinuous (jump) components in the price of an asset underlying an option. Our test examines the prices of atthemoney and outofthemoney options as the option maturity approaches zero. We show that these prices...

Persistent link: https://www.econbiz.de/10005134834

Advancing the iid Test Based on Integration across the Correlation Integral: Ranges, Competition, and Power

Kocenda, Evzen; Briatka, Lubos - EconWPA - 2004

This paper builds on Kočenda (2001) and extends it in two ways. First, two new intervals of the proximity parameter ε (over which the correlation integral is calculated) are specified. For these ε- ranges new critical values for various lengths of the data sets are introduced and through...

Persistent link: https://www.econbiz.de/10005407903

Static Hedging of Standard Options

Carr, Peter; Wu, Liuren - EconWPA - 2004

factors such as stochastic volatility. …

Persistent link: https://www.econbiz.de/10005413226

Boom In, Bust Out: Young Households and the Housing Price Cycle

Ortalo-Magne, Francois; Rady, Sven - EconWPA - 1998

The UK experienced a major residential real estate boom-bust cycle from the mid-Eighties to the mid-Nineties, accompanied by unprecedented shifts in the owner occupancy rate of young households. Previous empirical analyses have pointed toward income changes and financial deregulation as the...

Persistent link: https://www.econbiz.de/10005076946

On the Stability of Different Financial Systems

Fecht, Falko - EconWPA - 2003

direct investment opportunities, a bank-dominated financial system arises, in which banks provide liquidity transformation … secondary financial markets. Secondly, we analyze the effect a run on a single bank has on the entire financial system …. Interestingly, we can show that a bank run on a single bank causes contagion via the financial market neither in market- oriented …

Persistent link: https://www.econbiz.de/10005076982

Housing Market Fluctuations in a Life-Cycle Economy with Credit Constraints

Ortalo-Magne, Francois; Rady, Sven - EconWPA - 1998

This paper presents a first step towards a new theory of housing market fluctuations. We develop a life-cycle model where agents face credit constraints and their housing consumption is restricted to a discrete set of possibilities. The market interaction of young credit constrained agents...

Persistent link: https://www.econbiz.de/10005134801

A Unified Approach to Credit Crunches, Financial Instability, and Banking Crises

Peter, Goetz von - EconWPA - 2003

We link banking and asset prices in a simple monetary macroeconomic model. Our main innovation is to consider how wide-spread default affects the banking system. We find that the interaction of credit, asset prices, and loan losses explains a complete spectrum of outcomes, including financial...

Persistent link: https://www.econbiz.de/10005412610

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