We present a quantitative study of the markets and models evolution across the credit crunch crisis. In particular, we focus on the fixed income market and we analyze the most relevant empirical evidences regarding the divergences between Libor and OIS rates, the explosion of Basis Swaps...

We present a quantitative study of the markets and models evolution across the credit crunch crisis. In particular, we focus on the fixed income market and we analyze the most relevant empirical evidences regarding the divergences between Libor and OIS rates, the explosion of Basis Swaps...

Using three alternative decompositions of the credit default swap premium this study examines how investors judge the credit risk of banks and non-banks before, during, and after the financial crisis of 2007-2009. The empirical findings, based on a sample of 213 major US and European firms,...

We review the main changes in the interbank market after the financial crisis started in August 2007. In particular, we focus on the fixed income market and we analyse the most relevant empirical evidences regarding the divergence of the existing basis between interbank rates with different...

In response to the financial crisis, a plethora of new research appeared which attempted to understand, incorporate, and delineate the most significant changes observed in the market. Editors Massimo Morini and Marco Bianchetti have both experienced first-hand how market patterns and...

We show theoretically and empirically that the dollar’s status as the global reserve currency can lead to economically significant changes in U.S. money market liquidity. We develop a model in which U.S. money market spreads respond to foreign central banks’ exchange-rate management...

We propose a novel time-changed L évy LIBOR market model for the joint pricing of caps and swaptions. The time changes are split into three components. The first component allows us to match the volatility term structure, the second generates stochastic volatility, and the third one...

We propose a model which enables the measurement of term risk in markets which are sensitive to systemic risk. With its origins in the spectralisation of the AR(1) process (using the Wiener-Khintchine theorem, and a P ~ Q transform), a Q jump martingale solution is found which is unique and...

We explore the implications of a common market and academic practice which is known as freezing the drift when dealing with swap interest rate dynamics.In mathematical terms this can be better understood as imposing a low variance martingale (LVM) assumption. We look into the LVM Assumption...

This article presents a structural model for interbank money market rates (XIBOR rates) that endogenously generates the basis spreads that characterize post-crisis fixed income markets: XIBOR-OIS spreads, tenor basis spreads, and the forward basis. In contrast to existing multi-curve models,...