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Cash sub-additive risk measures and interest rate ambiguity

El Karoui, Nicole; Ravanelli, Claudia - 2008

A new class of risk measures called cash sub-additive risk measures is introduced to assess the risk of future financial, nonfinancial and insurance positions. The debated cash additive axiom is relaxed into the cash sub-additive axiom to preserve the original difference between the numeraire of...

Persistent link: https://www.econbiz.de/10003961489

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

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

Sentimental recovery

Pazarbasi, Altan; Schneider, Paul; Vilkov, Grigory - 2019 - This version: November 29, 2019

We investigate the market-compatible degree of agent heterogeneity by identifying and analyzing the full range of conditional beliefs consistent with observed asset prices and good-deal bounds. Our methodology neither makes assumptions on underlying processes nor does it use survey data. It can...

Persistent link: https://www.econbiz.de/10012134438

Pricing Autocallables under Local-Stochastic Volatility

Farkas, Walter; Ferrari, Francesco; Ulrych, Urban - 2022

This paper investigates the pricing of single-asset autocallable barrier reverse convertibles in the Heston local-stochastic volatility (LSV) model. Despite their complexity, autocallable structured notes are the most traded equity-linked exotic derivatives. The autocallable payoff embeds an...

Persistent link: https://www.econbiz.de/10013491888

Efficiency in large dynamic panel models with common factor

Gagliardini, Patrick; Gouriéroux, Christian - 2009 - This version: March 2009

This paper deals with efficient estimation in exchangeable nonlinear dynamic panel models with common unobservable factor. The specification accounts for both micro- and macro-dynamics, induced by the lagged individual observation and the common stochastic factor, respectively. For large...

Persistent link: https://www.econbiz.de/10003970309

Financial bubbles, real estate bubbles, derivative bubbles, and the financial and economic crisis

Sornette, Didier; Woodard, Ryan - 2009

The financial crisis of 2008, which started with an initially well-defined epicenter focused on mortgage backed securities (MBS), has been cascading into a global economic recession, whose increasing severity and uncertain duration has led and is continuing to lead to massive losses and damage...

Persistent link: https://www.econbiz.de/10003970395

Efficient derivative pricing by the extended method of moments

Gagliardini, Patrick; Gouriéroux, Christian; Renault, Eric - 2010 - this version: October 2009

. The local conditional moment restrictions are of special relevance in derivative pricing for reconstructing the pricing … operator at a given day, by using the information in a few cross-sections of observed traded derivative prices and a time … series of underlying asset returns. The estimated derivative prices are consistent for large time series dimension, but fixed …

Persistent link: https://www.econbiz.de/10003973066

The price of protection : derivatives, default risk, and margining

Gibson, Rajna; Murawski, Carsten - 2008

We investigate the effects of margining, a widely-used mechanism to attach collateral to derivatives contracts, on derivatives' trading volume, default risk, and on the welfare in the banking sector. First, we develop a stylized banking sector equilibrium model to derive a set of testable...

Persistent link: https://www.econbiz.de/10003966202

On the lease rate, the convenience yield and speculative effects in the gold futures market

Barone-Adesi, Giovanni; Geman, Hélyette; Theal, John - 2009

By examining data on the gold forward offered rate (GOFO) and lease rates over the period 1996- 2009, we conclude that the convenience yield of gold is better approximated by the lease rate than the interest-adjusted spread of Fama amp; French (1983). Using the latter quantity, we study the...

Persistent link: https://www.econbiz.de/10003967104

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