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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

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

Equity option-implied probability of default and equity recovery rate

Chang, Bo Young; Orosi, Greg - 2016

There is a close link between prices of equity options and the default probability of a firm. We show that in the presence of positive expected equity recovery, standard methods that assume zero equity recovery at default misestimate the option-implied default probability. We introduce a simple...

Persistent link: https://www.econbiz.de/10011571821

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

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 … CDS prices and bond yield spreads (CDS-Bond spread basis). Collectively our analysis corroborates the theory on the …

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

A fifty-year retrospective on credit risk models, the Altman Z-score family of models and their applications to financial markets and managerial strategies

Altman, Edward I. - In: The journal of credit risk : published quarterly by … 14 (2018) 4, pp. 1-34

Persistent link: https://www.econbiz.de/10012041794

Agent-based model of system-wide implications of funding risk

Hałaj, Grzegorz - 2018

Liquidity has its systemic aspect that is frequently neglected in research and risk management applications. We build a … model that focuses on systemic aspects of liquidity and its links with solvency conditions accounting for pertinent …