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Inter-linkages between firms are a channel by which idiosyncratic shocks to one firm can affect the returns of linked counterparties. We extend a factor model of returns to allow for the transmission of idiosyncratic shocks between linked counterparties. We show that the structure of...
Persistent link: https://www.econbiz.de/10013092524
We study the relation between liquidity in financial markets and post-trading fees (i.e. clearing and settlement fees …). The clearing and settlement agent (CSD) faces different marginal costs for different types of transactions. Costs are …
Persistent link: https://www.econbiz.de/10013111537
We study the relation between liquidity in financial markets and post-trading fees (i.e. clearing and settlement fees …). The clearing and settlement agent (CSD) faces different marginal costs for different types of transactions. Costs are …
Persistent link: https://www.econbiz.de/10013112592
We consider financial networks where agents are linked to each other via mutual liabilities. In case of bankruptcy, there are potentially many bankruptcy rules, ways to distribute the assets of a bankrupt agent over the other agents. One common approach is to first apply pairwise netting of...
Persistent link: https://www.econbiz.de/10014454464
Persistent link: https://www.econbiz.de/10015323993
Persistent link: https://www.econbiz.de/10011673730
We analyse the consequences of post-trade risk reduction services for systemic risk in derivatives markets. Our focus is on portfolio rebalancing, which is a mechanism of injecting new trades to reduce the overall counterparty exposure, and portfolio compression, which is a mechanism to reduce...
Persistent link: https://www.econbiz.de/10013222544
In a financial system, the interconnectedness among entities from investing in common assets (portfolio overlaps) is considered an important channel for the propagation of systemic risk because this interconnectedness can facilitate the contagion of fire sales and lead to widespread sales as...
Persistent link: https://www.econbiz.de/10012893492
We analyse the consequences of conservative portfolio compression, i.e., netting cycles in financial networks, on systemic risk. We show that the recovery rate in case of default plays a significant role in determining whether portfolio compression is potentially beneficial. If recovery rates of...
Persistent link: https://www.econbiz.de/10012895507
Aiming to optimally harvest global equity factor premiums, we investigated the benefits of parametric portfolio policies for timing factors conditioned on time-series predictors and tilting factors based on cross-sectional factor characteristics. We discovered that equity factors are predictably...
Persistent link: https://www.econbiz.de/10012897582