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Repo markets, counterparty risk and the 2007/2008 liquidity crisis

Ewerhart, Christian; Tapking, Jens - 2008

A standard repurchase agreement between two counterparties is considered to examine the endogenous choice of collateral assets, the feasibility of secured lending, and welfare implications of the central bank’s collateral framework. As an important innovation, we allow for two-sided...

Persistent link: https://www.econbiz.de/10011604955

Liquidity hoarding and interbank market spreads: the role of counterparty risk

Heider, Florian; Hoerova, Marie; Holthausen, Cornelia - 2009

banks to have private information about the risk of their assets. We show how banks’ asset risk affects funding liquidity in … state with adverse selection and elevated rates; and iii) market breakdown with liquidity hoarding. We provide an … of unsecured rates and excess reserves banks hold, as well as the inability of massive liquidity injections by central …

Persistent link: https://www.econbiz.de/10011605172

The functional form of yield curves

Brousseau, Vincent - 2002

Yield curves built from liquid instruments tend to exhibit specific features, both in term of smoothness and in term of patterns. The paper presents empirical evidence that those liquid yiled curves frequently conform to a specific functional form. This specific functional form is predicted by a...

Persistent link: https://www.econbiz.de/10011604194

Time variation in the tail behaviour of bunds futures returns

Upper, Christian; Werner, Thomas - 2002

The present paper focuses on three questions: (i) Are heavy tails a relevant feature of the distribution of BUND futures returns? (ii) Is the tail behaviour constant over time? (iii) If it is not, can we use the tail index as an indicator for financial market risk and does it add value in...

Persistent link: https://www.econbiz.de/10011604245

Modelling the implied probability of stock market movements

Glatzer, Ernst; Scheicher, Martin - 2003

In this paper we study risk-neutral densities (RNDs) for the German stock market. The use of option prices allows us to quantify the risk-neutral probabilities of various levels of the DAX index. For the period from December 1995 to November 2001, we implement the mixture of log-normals model...

Persistent link: https://www.econbiz.de/10011604258

Option-implied asymmetries in bond market expectations around monetary policy actions of the ECB

Vähämaa, Sami - 2004

This paper uses data on German government bond futures options to examine the behaviour of market expectations around monetary policy actions of the European Central Bank (ECB). In particular, this paper focuses on the asymmetries in bond market expectations, as measured by the skewness of...

Persistent link: https://www.econbiz.de/10011604361

The informational content of over-the-counter currency options

Christoffersen, Peter; Mazzotta, Stefano - 2004

Financial decision makers often consider the information in currency option valuations when making assessments about future exchange rates. The purpose of this paper is to systematically assess the quality of option based volatility, interval and density forecasts. We use a unique dataset...

Persistent link: https://www.econbiz.de/10011604412

Is the corporate bond market forward looking?

Hilscher, Jens - 2007

This paper presents empirical evidence that the corporate bond market is forward looking with respect to volatility. I use the Merton (1974) model to calculate a measure of implied volatility from corporate bond yield spreads. I find that corporate bond transaction prices contain substantial...

Persistent link: https://www.econbiz.de/10011604846

The pricing of risk in European credit and corporate bond markets

Berndt, Antje; Obreja, Iulian - 2007

This paper investigates the determinants of the default risk premia embedded in the European credit default swap spreads. Using a modified version of the intertemporal capital asset pricing model, we show that default risk premia represent compensation for bearing exposure to systematic risk and...

Persistent link: https://www.econbiz.de/10011604851

Assessing the compensation for volatility risk implicit in interest rate derivatives

Fornari, Fabio - 2008

Volatilities implied from interest rate swaptions are used to assess the size and the sign of the compensation for volatility risk, for dollar, euro and pound rates at a daily frequency, between October 1998 and August 2006. The measurement of the volatility risk premium rests on a simple model...

Persistent link: https://www.econbiz.de/10011604905

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