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The pitfalls of central clearing in the presence of systematic risk
Kubitza, Christian; Pelizzon, Loriana; Getmansky, Mila - 2018
Through the lens of market participants' objective to minimize counterparty risk, we provide an explanation for the reluctance to clear derivative trades in the absence of a central clearing obligation. We develop a comprehensive understanding of the benefits and potential pitfalls with respect...
Persistent link: https://www.econbiz.de/10011923506
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Corporate Derivatives Use and the Cost of Equity
Lin, Chen-Miao - 2010
We investigate the relation between derivatives use and corporations' cost of equity capital. Using a large sample of non-financial firms, we compute and analyze (i) the relative cost of equity of firms that use derivatives and those that do not; and (ii) the change in cost of equity experienced...
Persistent link: https://www.econbiz.de/10013137327
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Managing Financial Risk by Using Derivatives : A Study of United Arab Emirate Listed Companies
Said, Ali - 2017
and have problems ranging from illiquidity of trading to lack of theoretical development regarding modeling …
Persistent link: https://www.econbiz.de/10012951444
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Liquidity Options
Golts, Maxim - 2019
The financial crisis of 2007-2009 highlighted the importance of liquidity to many investors. University endowment funds, for example, were forced to sell publicly traded securities at substantially depressed values in order to meet funding commitments to private investments. Hedge funds engaged...
Persistent link: https://www.econbiz.de/10012906096
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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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Potential Future Exposure (PFE), Credit Value Adjustment (CVA) and Wrong Way Risk (WWR) Analytic Solutions
Syrkin, Mark - 2015
Developing analytic techniques for potential future exposure (PFE) of a general type transaction and applying it to credit value adjustment (CVA) and wrong way risk (WWR). The solutions provide a transparent and computationally friendly analytic formulas and good quality analytic estimates of...
Persistent link: https://www.econbiz.de/10013025050
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Volmageddon and the failure of short volatility products
Augustin, Patrick; Cheng, Ing-Haw; Van den Bergen, Ludovic - 2021
The rapid growth of exchange traded products (ETPs) has raised concerns about their implications for financial stability. A case in point is the abrupt market crash of short volatility strategies on February 5th 2018. In this paper, we describe this “Volmageddon” event and illustrate the...
Persistent link: https://www.econbiz.de/10012585893
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Options and Risk
Bruno, Giovanni - 2020
We propose a parsimonious general equilibrium extension of the Black-Scholes economy that helps clarify how options' prices, expected returns, risk exposure, and optimal exercise policies respond to variations in the risk exposure of the underlying asset. The model allows one to separate the...
Persistent link: https://www.econbiz.de/10012830325
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Risk Management and Financial Derivatives: An Overview
Hammoudeh, Shawkat; McAleer, Michael - Department of Economics and Finance, College of … - 2012
transform, the rise and fall of S&P500 variance futures, predicting volatility using Markov switching multifractal model …: evidence from S&P100 index and equity options, the performance of commodity trading advi-sors: a mean-variance-ratio test … approach, forecasting volatility via stock return, range, trading volume and spillover effects: the case of Brazil, estimating …
Persistent link: https://www.econbiz.de/10010907433
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Credit Migration Derivatives : Modelling of the Underlying Credit Migration Matrices
Andersson, Andreas - 2008
In this thesis I develop a model for describing the dynamic behavior of Credit Migration Matrices under a Point-in-time Rating Philosophy. Characteristics of the yearly Migration Matrices following a Point-in-Time Philosophy are presented. Through the introduction of the concept of Rating...
Persistent link: https://www.econbiz.de/10014214264