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Arbitrage crashes, financial accelerator, and sudden market freezes

Zhang, Ally Quan - 2017 - Last update: November 18, 2017, preliminary draft

arbitrage crashes and failure of systemically important intermediaries during the global financial crisis. Intermediaries pledge … productive capital as repo collateral to fund the margin for their arbitrage positions. A tiny drop in the market liquidity of … movements and losses. This further reduces the collateral value of arbitrage portfolios and triggers more fire-sales in both …

Persistent link: https://www.econbiz.de/10011875637

A dynamic equilibrium model of ETFs

Malamud, Semyon - 2015

I develop a dynamic general equilibrium model of exchange traded funds (ETFs) that accounts for the two-tier ETF market structure with both a centralized exchange (secondary market) and a creation/redemption mechanism (primary market) operating through market-making firms known as Authorized...

Persistent link: https://www.econbiz.de/10011412317

Arbitraging the Basel Securitization Framework : evidence from German ABS investment

Efing, Matthias - 2014

If regulation fails to differentiate between priced and idiosyncratic risk, it incentivizes investors to reach for yield. Studying securitization exposures on the balance sheets of German banks, I show evidence consistent with this prediction. Banks with tight regulatory constraints (low capital...

Persistent link: https://www.econbiz.de/10011293796

Arbitrage free dispersion

Orlowski, Piotr; Sali, Andras; Trojani, Fabio - 2018 - This version: August 10, 2018

We develop a theory of arbitrage-free dispersion (AFD) that characterizes the testable restrictions of asset pricing …

Persistent link: https://www.econbiz.de/10012003245

Viability and arbitrage under Knightian uncertainty

Burzoni, Matteo; Riedel, Frank; Soner, Halil Mete - 2017

, we discuss the absence of arbitrage, its relation to economic viability, and the existence of suitable nonlinear pricing …

Persistent link: https://www.econbiz.de/10011874707

On the American swaption in the linear-rational framework

Filipović, Damir; Kitapbayev, Yerkin - 2016

nonlinear integral equation that can be readily solved numerically. We obtain the arbitrage-free price of the American swaption … and the optimal exercise strategies in terms of swap rates for both fixed-rate payer and receiver swaps. Finally, we show …

Persistent link: https://www.econbiz.de/10011516038

Linear-rational term structure models

Filipović, Damir; Larsson, Martin; Trolle, Anders B. - 2014

We introduce the class of linear-rational term structure models in which the state price density is modeled such that bond prices become linear-rational functions of the factors. This class is highly tractable with several distinct advantages: i) ensures nonnegative interest rates, ii) easily...

Persistent link: https://www.econbiz.de/10010338764

Pension liquidity risk

Jansen, Kristy A. E.; Klingler, Sven; Ranaldo, Angelo; … - 2024

Persistent link: https://www.econbiz.de/10014486912

Best friend or worst enemy? : dynamics and multiple equilibria with financial arbitrage, production and collateral constraints

Zhang, Quan - 2017 - Last update: March 23, 2017

We develop a tractable model to study the macroeconomic impacts of limited arbitrage by linking arbitrage activities … arbitrage failures and recessions. Collateralization adds extra value to real-sector investments, and ultimately helps boost …

Persistent link: https://www.econbiz.de/10011626467

Arbitrage in stationary markets

Evstigneev, Igor V. (contributor); Kapoor, Dhruv (contributor) - 2007

We analyse questions of arbitrage in fnancial markets in which asset prices change in time as stationary stochastic … framework of this model, we find conditions that are necessary and sufficient for the absence of arbitrage opportunities. We …

Persistent link: https://www.econbiz.de/10003550863