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Toxic asset subsidies and the early redemption of talf loans
Wilson, Linus - In: International Journal of Financial Studies : open … 10 (2022) 2, pp. 1-20
This paper develops a formula to numerically estimate the unsubsidized, fair-market value of the toxic assets purchased with Federal Reserve loans. It finds that subsidy rates on these loans were on average 33.9 percent at origination. In contrast, by the 3rd quarter of the 2010, there was on...
Persistent link: https://www.econbiz.de/10013252762
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Hedging Volatility Risk of Exotic Structures Using Variance Derivatives
Zarov, Iliyan Radev - 2012
We investigate the effect of including variance derivatives as calibration and hedging instruments for pricing and hedging exotic structures. This is studied empirically using market data for SPX and VIX derivatives applied in a stochastic volatility jump diffusion model
Persistent link: https://www.econbiz.de/10013113731
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Optimal Carry and Momentum Returns in Futures Markets : A Compensation for Capital Constrained Hedge Funds?
Ahmerkamp, Jan Danilo - 2013
and momentum strategies in futures markets across asset classes. We construct optimal carry and momentum portfolios from … that the predictability of expected returns in futures markets reflects the scarcity of speculative capital and is …
Persistent link: https://www.econbiz.de/10013085038
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Liquidity Risk, instead of Funding Costs, Leads to a Valuation Adjustment for Derivatives and other Assets
Nauta, Bert-Jan - 2014
Traditionally derivatives and other assets have been valued in isolation. The balance sheet of which a derivative position is part, was not included in the valuation. Recently, aspects of the valuation have been revised to incorporate certain elements of the balance sheet in the valuation....
Persistent link: https://www.econbiz.de/10013064776
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Convexity Meets Replication : Hedging of Swap Derivatives and Annuity Options
Zheng, Wendong - 2010
Convexity correction arises when one computes the expected value of an interest rate index under a probability measure other than its own natural martingale measure. As a typical example, the natural martingale measure of the swap rate is the swap measure with annuity as the numeraire. However,...
Persistent link: https://www.econbiz.de/10013152479
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Derivatives Hedging, Capital and Leverage
Prampolini, Andrea - 2018
In this work Massimo Morini and Andrea Prampolini argue that KVA is a component of profit turned into a valuation adjustment as a by-product of regulatory constraints based on a conservative consideration of market hedges. The regulatory foundations of KVA are analyzed from RWAs to the Leverage...
Persistent link: https://www.econbiz.de/10012936693
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Basis Risk When Hedging a Global Credit Portfolio
Chamizo, Alvaro - 2017
The calculation of the capital charge for CVA risk, as required by the Basel Committee on Banking Supervision, is usually rather unstable due to the volatility of CDS spreads. Since credit derivatives on single names are not very liquid, the implied adjustments in capital charges could be...
Persistent link: https://www.econbiz.de/10012944310
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Option Pricing in an Investment Risk-Return Setting
Kim, Young Shin - 2019
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the contract's maturity the contract is perfectly hedged. We...
Persistent link: https://www.econbiz.de/10012865720
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The Portfolio Diversification Potential of Long VIX Futures and Options Strategies
Szado, Edward - 2019
futures and options may have the potential to provide significant diversification benefits for traditional portfolios. However …, since the term structure of VIX futures is generally upward sloping, long VIX futures positions can place a significant drag … on portfolio performance.In this paper we consider the performance of strategies that buy VIX futures or VIX call options …
Persistent link: https://www.econbiz.de/10012870101
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Basis Risk in Hedging a CDS Portfolio with Credit Indices
Chamizo, Alvaro - 2017
The financial crisis has raised concerns throughout the industry on the possibility that hedging credit valuation adjustment (CVA) might become increasingly difficult should the long-standing correlation between singlename and index CDS products break down. So, we provide an estimation of the...
Persistent link: https://www.econbiz.de/10012970402