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Systemic risk and the refinancing ratchet effect

Khandani, Amir E.; Lo, Andrew W.; Merton, Robert C. - 2009 - This draft: September 13, 2009

The confluence of three trends in the U.S. residential housing market - rising home prices, declining interest rates, and near-frictionless refinancing opportunities - led to vastly increased systemic risk in the financial system. Individually, each of these trends is benign, but when they occur...

Persistent link: https://www.econbiz.de/10003889053

Identifying speculative demand shocks in commodity futures markets through changes in volatility

Hachula, Michael; Rieth, Malte - 2017

This paper studies the effects of financial speculation on commodity futures returns, using publicly available data from the US Commodity Futures Trading Commission, aggregated by trader groups. We exploit the heteroskedasticity in the weekly data to identify exogenous variation in speculators'...

Persistent link: https://www.econbiz.de/10011619592

Liquidity Timing in Commodity Markets and the Impact of Financialization

Neuhierl, Andreas - 2016

correlate positively to calendar spread liquidity and constraints on intermediation capital. The strategy delivers low … risk. This rebalancing creates predictable demand for liquidity. We also apply the strategy to a group of commodities not …

Persistent link: https://www.econbiz.de/10013003136

Stochastic Volatility of Financial Assets and Default Risk

Katz, Yuri A. - 2014

We present the non-Gaussian extension of the traditional Merton framework, which takes into account slowly relaxing fluctuations of the volatility of the firm's market value of financial assets. The minimal version of the model depends on the Tsallis entropic parameter q and the generalized...

Persistent link: https://www.econbiz.de/10013048256

Default dependence : the equity default relationship

Turnbull, Stuart M. (contributor); Yang, Jun (contributor) - 2008

The paper examines three equity-based structural models to study the nonlinear relationship between equity and credit default swap (CDS) prices. These models differ in the specification of the default barrier. With cross-firm CDS premia and equity information, we are able to estimate and compare...

Persistent link: https://www.econbiz.de/10003641322

Liquidity Shocks, Commodity Financialization, and Market Comovements

Hu, Conghui - 2020

composite liquidity index and five different types of liquidity measures. We find that liquidity shocks, including both funding …We explore whether and how liquidity factors influence risk transfers between commodity and stock markets using a … liquidity and market liquidity, are positively associated with comovements between commodity and stock markets after 2000 …

Persistent link: https://www.econbiz.de/10012833327

Types of Liquidity and Limits to Arbitrage - The Case of Credit Default Swaps

Guo, Liang - 2020

period 6/2008 to 9/2009, we show that funding-liquidity (shadow cost of capital for arbitrageurs) as well as asset specific … liquidity (determinants of margin requirements) explain recent deviations in the arbitrage based parity relationship between the … determinants of the basis, and suggests that it is important to distinguish between these two types of liquidity in determining the …

Persistent link: https://www.econbiz.de/10012857558

Mispricing of S&P 500 index options

Constantinides, George M.; Jackwerth, Jens Carsten; … - 2005

We document widespread violations of stochastic dominance in the one-month S&P 500 index options market over the period 1986-2002. These violations imply that a trader can improve her expected utility by engaging in a zero-net-cost trade. We allow the market to be incomplete and also imperfect...

Persistent link: https://www.econbiz.de/10010266937

The dependence structure between carbon emission allowances and financial markets: A copula analysis

Gronwald, Marc; Ketterer, Janina; Trück, Stefan - 2011

This paper applies different copulas in order to investigate the complex dependence structure between EU emission allowance (EUA) futures returns and those of other commodities, equity and energy indices. The analysis yields important insights into the relationship between carbon, commodities...

Persistent link: https://www.econbiz.de/10010274834

A diffusion approximation to the Markov chains model of the financial market and the expected riskless profit under selling of call and put options

Nagaev, Alexander V.; Nagaev, Sergei A.; Kunst, Robert M. - 2005

A discrete time model of financial markets is considered. It is assumed that the stock price evolution is described by a homogeneous Markov chain. In the focus of attention is the expected value of the guaranteed profit of the investor that arises when the jumps of the stock price are bounded....

Persistent link: https://www.econbiz.de/10010293729