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...

Rehypothecation is the practice where a derivatives dealer reuses collateral posted from its end user in over-the-counter (OTC) derivatives markets. Although rehypothecation benefits the end user through cost reduction of derivative trades, it also creates additional counterparty credit risk...

This study examines novel momentum strategies in commodities futures markets that incorporate term-structure information. We show that momentum strategies that invest in contracts on the futures curve with the largest expected roll-yield or the strongest momentum earn significantly higher...

This paper investigates the roles of illiquidity and credit risk in determining the relations between price volatility of a bond and its trading frequency and trade size based on a large transaction dataset from October 2004 to June 2012. We find a positive relation between volatility and...

Empirical studies on credit spread determinants are predicated on the presence of a single-regime over the entire sample period and thus find limited explanatory power. A single-regime model hides the fact that explanatory variables take on different loadings across changing patterns in credit...

Using intraday trades and quotes data, we study the stock options market before, during, and after the market events of May 6, 2010. Focusing on the S&P 500 and S&P 100 stock options, we explore if the options market provided any discernible signals that forewarned the extreme volatility on that...

Ratings issued by credit rating agencies (CRAs) play an important role in the global financial environment. Among other issues, past studies have explored the potential for predicting these ratings using a variety of explanatory factors and modeling approaches. This paper describes a...

While CBOE’s VIX index is widely acknowledged as a broad-based investor “fear gauge” for its strong inverse relationship with major equity indexes, one cannot necessarily expect it to translate to the level of future turbulence or investor risk-aversion in fixed-income markets. Indeed,...

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...

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...