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Risk Minimization in Stochastic Volatility Models: Model Risk and Empirical Performance
Poulsen, Rolf; Schenk-Hoppé, Klaus Reiner; Ewald, … - Institut für Schweizerisches Bankwesen <Zürich> - 2007
In this paper the performance of locally risk-minimizing hedge strategies for European options in stochastic volatility … large class of diffusion-type stochastic volatility models, and they are as easy to implement as usual delta hedges. Our …
Persistent link: https://www.econbiz.de/10005858246
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Establishing Consistent Collateral Policies for Central Banks’ Open Market Operations
Cossin, Didier; Huang, Zhijiang; González, Fernando; … - Institut für Schweizerisches Bankwesen <Zürich>; … - 2002
We derive a general framework for collateral risk control determination for central bank's open market operations. This framework allows us to determine the schedule of haircuts consistent with the risk tolerated by the central bank while at the same time reducing the possibility of arbitrage...
Persistent link: https://www.econbiz.de/10005859381
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Analyzing Credit Risk in Default Swap Transaction Data : Is Fixed-Income Markets’ Information Sufficient to Evaluate Credit Risk?
Cossin, Didier; Hricko, Tomas; Aunon-Nerin, Daniel; … - Institut für Schweizerisches Bankwesen <Zürich>; … - 2003
We investigate the influence of various variables on credit default swap transaction data. Credit derivatives are arguably a superior proxy to credit risk than bond spreads. The variables considered include fixed-income as well as equity markets data. We thus provide an international analysis of...
Persistent link: https://www.econbiz.de/10005859382
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Term structures of implied volatilities : Absence of arbitrage and existence results
Schweizer, Martin; Wissel, Johannes - Institut für Schweizerisches Bankwesen <Zürich> - 2006
This paper studies modelling and existence issues for market models of stochastic implied volatility in a continuous … we give explicit examples of volatility coefficients satisfying the required assumptions. …
Persistent link: https://www.econbiz.de/10005858725
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Libor Market Model with Regime-Switching Volatility
Elliott, Robert; Valchev, Stoyan - Institut für Schweizerisches Bankwesen <Zürich> - 2004
This paper provides regime-switching stochastic volatility extensions of the LIBOR market model. First, the … instantaneous forward LIBOR volatility is modulated by a continuous time homogeneous Markov chain. In a second parameterization, the … volatility is modelled by a square root process with a regime-switching reference level. We obtain analytical solutions for the …
Persistent link: https://www.econbiz.de/10005858810
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Efficient Calibration of Trinomial Trees for One-Factor Short Rate Models
Leippold, Markus; Wiener, Zvi - Institut für Schweizerisches Bankwesen <Zürich>; … - 2003
adjusted to the volatility structure. The proposed approach leads to an efficient and exible constron met for trinomial trees …
Persistent link: https://www.econbiz.de/10005858854
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On the presence of unspanned volatility in European interest rate options
Reno, Roberto; Uboldi, Adamo - Institut für Schweizerisches Bankwesen <Zürich> - 2005
derivatives are mostly uncorrelated, advocating the presence of unspanned volatility. This letter shows that their results can be … explained in the framework of a Gaussian HJM model with humped term-structure volatility. This implies that hedging interest …
Persistent link: https://www.econbiz.de/10005858864
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Hybrid Cat-bonds
Barrieu, Pauline; Loubergé, Henri - Institut für Schweizerisches Bankwesen <Zürich> - 2007
Natural catastrophes attract regularly the attention of media and have become a source of public concern. From a financial viewpoint, natural catastrophes represent idiosyncratic risks,diversifiable at the world level. But for reasons analyzed in this pap er reinsurance markets are unable to...
Persistent link: https://www.econbiz.de/10005857781
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An Intensity Based Non-Parametric Default Model for Residential Mortgage Portfolios
Burkhard, Jürg; De Giorgi, Enrico - Institut für Schweizerisches Bankwesen <Zürich>; … - 2004
In June 2003 Swiss banks held over CHF 500 billion in mortgages. This important segment accounts for about 63% of all loan portfolios of Swiss banks. Since default insurance is not common in Switzerland, the corresponding risks are a severe threat for the health of the financial system. We...
Persistent link: https://www.econbiz.de/10005858102
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Some Statistical Pitfalls in Copula Modeling for Financial Applications
Fermanian, Jean-David; Scaillet, Olivier - Institut für Schweizerisches Bankwesen <Zürich>; … - 2004
In this paper we discuss some statistical pitfalls that may occur in modeling cross-dependences with copulas in financial applications. In particular we focus on issues arising in the estimation and the empirical choice of copulas as well as in the design of time-dependent copulas.
Persistent link: https://www.econbiz.de/10005858145