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Credit Bubbles in Arbitrage Markets : The Geometric Arbitrage Approach to Credit Risk
Farinelli, Simone - 2019
We apply Geometric Arbitrage Theory to obtain results in mathematical finance for credit markets, which do not need … dynamics for credit market allowing for arbitrage possibilities. Moreover, arbitrage credit bubbles for both base credit assets … and credit derivatives are explicitly computed for the market dynamics minimizing the arbitrage …
Persistent link: https://www.econbiz.de/10012904838
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Credit Risk Sharing and Credit Market Regulation
Subramanian, Ajay - 2021
We develop a tractable general equilibrium model to analyze credit risk sharing via credit default swaps (CDS) and CDS market regulation under aggregate uncertainty. If available equity capital is below a threshold, any equilibrium of the basic economy with no CDS markets features firm default...
Persistent link: https://www.econbiz.de/10013230414
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CDS Pricing Under Basel III : Capital Relief and Default Protection
Kenyon, Chris - 2014
Basel III introduces new capital charges for CVA. These charges, and the Basel 2.5 default capital charge can be mitigated by CDS. Therefore, to price in the capital relief that CDS contracts provide, we introduce a CDS pricing model with three legs: premium; default protection; and capital...
Persistent link: https://www.econbiz.de/10013064996
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Credit Default Swaps in General Equilibrium : Endogenous Default and Credit Spread Spillovers
Darst, Matthew - 2018
This paper shows that credit default swaps (CDS) can affect the type of debt firms issue. Firms face a trade-off between investment scale and the cost of capital measured by the credit spread. Small-scale investment is safe, fully collateralized, but earns modest profits in all states....
Persistent link: https://www.econbiz.de/10012938470
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Option-Based Pricing of Wrong Way Risk for CVA
Kenyon, Chris - 2016
The two main issues for managing wrong way risk (WWR) for the credit valuation adjustment (CVA, i.e. WW-CVA) are calibration and hedging. Hence we start from a novel model-free worst-case approach based on static hedging of counterparty exposure with liquid options. We say "start from" because...
Persistent link: https://www.econbiz.de/10012986205
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Credit Default Swaps in General Equilibrium : Spillovers, Credit Spreads, and Endogenous Default
Darst, Matthew - 2016
This paper highlights two new effects of credit default swap markets (CDS) in a general equilibrium setting. First, when firms' cash flows are correlated, CDSs impact the cost of capital{credit spreads{and investment for all firms, even those that are not CDS reference entities. Second, when...
Persistent link: https://www.econbiz.de/10012992726
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Unsecured Credit Supply Risk and Bond Prices
Mabille, Pierre - 2021
Changes in credit supply induce large and frequent variations in households' access to unsecured debt. They generate a novel financial precautionary motive, which compounds the classical motive associated with idiosyncratic income risk, as borrowers accumulate risk-free bonds to hedge against...
Persistent link: https://www.econbiz.de/10013239541
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Trends in credit market arbitrage
Boyarchenko, Nina; Gupta, Pooja; Steele, Nick; Yen, … - 2016 - Revised July 2016
arbitrage trades during the second half of 2015 and the first quarter of 2016. In this paper, we examine three explanations … appear small relative to the post-crisis increase in cost of capital. We present the mechanics of the CDS-bond arbitrage …
Persistent link: https://www.econbiz.de/10011515933
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Finanzmärkte : Wertpapiere, Investitionen, Finanzierungen
Spremann, Klaus; Gantenbein, Pascal - 2022 - 6., vollständig überarbeitete Auflage
Finanzmärkte sind zu einem bedeutenden Phänomen der modernen Gesellschaft geworden. Das Buch führt in die Märkte für Kapital ein, vor allem in die Märkte für Wertpapiere, Vermögenspositionen, Zertifikate und Kontrakte.(Verlagstext)
Persistent link: https://www.econbiz.de/10013189437
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Systematic risk of CDOs and CDO arbitrage
Hamerle, Alfred; Liebig, Thilo; Schropp, Hans-Jochen - 2009
"Arbitrage CDOs" have recorded an explosive growth during the years before the outbreak of the financial crisis. In the … present paper we discuss potential sources of such arbitrage opportunities, in particular arbitrage gains due to mispricing …. -- Collateralized debt obligations (CDO) ; arbitrage CDOs ; credit rating ; expected loss profile ; bond representation ; systematic …
Persistent link: https://www.econbiz.de/10003891104