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Liquidity risk in credit default swap markets
Junge, Benjamin; Trolle, Anders B. - 2013
We show that liquidity risk is priced in the cross section of returns on credit default swaps (CDSs). We measure CDS market illiquidity by aggregating deviations of credit index levels from their no-arbitrage values implied by the index constituents' CDS spreads, and we construct a tradable...
Persistent link: https://www.econbiz.de/10010258589
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Discrete-time option pricing with stochastic liquidity
Leippold, Markus; Schärer, Steven - 2016
Classical option pricing theories are usually built on the law of one price, neglecting the impact of market liquidity that may contribute to significant bid-ask spreads. Within the framework of conic finance, we develop a stochastic liquidity model, extending the discrete-time constant...
Persistent link: https://www.econbiz.de/10011515968
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Fed funds futures variance futures
Filipović, Damir; Trolle, Anders B. - 2015
We develop a novel contract design, the fed funds futures (FFF) variance futures, which reflects the expected realized … basis point variance of an underlying FFF rate. The valuation of short-term FFF variance futures is completely model … is computed by sampling the FFF rate discretely. The valuation of longer-term FFF variance futures is subject to an …
Persistent link: https://www.econbiz.de/10011293604
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A term-structure model for dividends and interest rates
Filipović, Damir; Willems, Sander - 2017
interest rates. Prices for dividend futures, bonds, and the dividend paying stock are given in closed form. We present an … specification has a good fit with Euribor interest rate swaps and swaptions, Euro Stoxx 50 index dividend futures and dividend …
Persistent link: https://www.econbiz.de/10011874740
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Sentimental recovery
Pazarbasi, Altan; Schneider, Paul; Vilkov, Grigory - 2019 - This version: November 29, 2019
and maximally allowed Sharpe ratios; it is related to trading activity and measures of risk in financial markets, as well …
Persistent link: https://www.econbiz.de/10012134438
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Volatility dependent structured products
Dyachenko, Artem; Farkas, Walter; Rieger, Marc Oliver - 2019
We construct a derivative that depends on the SPY and VIX and, in this way, incorporates both the market risk premium and the variance risk premium. We show that the product's Sharpe ratio is higher than the SPY Sharpe ratio. If we invest $10000 into the product, the products' payoff is around...
Persistent link: https://www.econbiz.de/10012177147
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Linear credit risk models
Ackerer, Damien; Filipović, Damir - 2016
We introduce a novel class of credit risk models in which the drift of the survival process of a firm is a linear function of the factors. The prices of defaultable bonds and credit default swaps (CDS) are linear-rational in the factors. The price of a CDS option can be uniformly approximated by...
Persistent link: https://www.econbiz.de/10011516035
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Dependent defaults and losses with factor copula models
Ackerer, Damien; Vatter, Thibault - 2016
We present a class of flexible and tractable static factor models for the term structure of joint default probabilities, the factor copula models. These high-dimensional models remain parsimonious with pair-copula constructions, and nest many standard models as special cases. The loss...
Persistent link: https://www.econbiz.de/10011619282
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Squeezing shorts through social news platforms
Allen, Franklin; Nowak, Eric; Pirovano, Matteo; … - 2021 - This draft: April 12, 2021
were the result of coordinated trading by retail investors, who discussed their trading strategies on social media …
Persistent link: https://www.econbiz.de/10012502167
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Market efficiency and limits to arbitrage : evidence from the Volkswagen short squeeze
Allen, Franklin; Haas, Marlene; Nowak, Eric; Tengulov, Angel - 2018
On October 26, 2008, Porsche announced a largely unexpected domination plan for Volkswagen. The resulting short squeeze in Volkswagen's stock briefly made it the most valuable listed company in the world. We argue that this was a manipulation designed to save Porsche from insolvency and the...
Persistent link: https://www.econbiz.de/10011875647