Showing 1 - 10 of 199
This paper considers the realistic modelling of derivative contracts on exchange rates. We propose a stochastic volatility model that recovers not only the typically observed implied volatility smiles and skews for short dated vanilla foreign exchange options but allows one also to price payoffs...
Persistent link: https://www.econbiz.de/10011209855
We derive a closed-form expression for the bilateral credit valuation adjustment of a credit default swap in presence of simultaneous defaults. We develop our analysis under a default intensity model specified by a class of three-dimensional subordinators, allowing for default dependence through...
Persistent link: https://www.econbiz.de/10011209864
We quantify the effects of financial regulation in an equilibrium model with delegated portfolio management. Fund managers trade stocks and bonds in an order-driven market, subject to transaction taxes and constraints on short-selling and leverage. Results are obtained on the equilibrium...
Persistent link: https://www.econbiz.de/10011194176
We put forward a framework for measuring systemic risk and attributing it to individual banks. Systemic risk is coherently measured as the expected loss to depositors and investors when a systemic event occurs. The risk contributions are calculated so as to ensure a full risk allocation among...
Persistent link: https://www.econbiz.de/10011065678
This paper evaluates several alternative formulations for minimizing the credit risk of a portfolio of financial contracts with different counterparties. Credit risk optimization is challenging because the portfolio loss distribution is typically unavailable in closed form. This makes it...
Persistent link: https://www.econbiz.de/10010574830
We apply Markov chain Monte Carlo methods to time series data on S&P 500 index returns, and to its option prices via a term structure of VIX indices, to estimate 18 different affine and non-affine stochastic volatility models with one or two variance factors, and where jumps are allowed in both...
Persistent link: https://www.econbiz.de/10010580929
We propose a new accurate method for pricing European spread options by extending the lower bound approximation of Bjerksund and Stensland (2011) beyond the classical Black–Scholes framework. This is possible via a procedure requiring a univariate Fourier inversion. In addition, we are also...
Persistent link: https://www.econbiz.de/10010709474
The valuation of corporate debt is an important issue in asset pricing. While there has been an enormous amount of theoretical modeling of corporate bond prices, there has been relatively little empirical testing of these models 1.(...)
Persistent link: https://www.econbiz.de/10005846844
Using a portfolio of Dow Jones Industrial Average index constituents and the index ETF, we document significant intraday deviations from the law of one price. These are especially pronounced at very short time intervals. The extent of deviations is related to volatility, liquidity, and...
Persistent link: https://www.econbiz.de/10011264661
In this paper we study option-implied interest rate forecasts and the development of risk premium and state prices in the Euribor futures option market. Using parametric and non-parametric statistical calibration, we transform the risk-neutral option implied densities for the Euribor futures...
Persistent link: https://www.econbiz.de/10011077973