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How and Why Congress Helped OTC Dealer Banks Create Derivatives’ Systemic Risk

Dew, James Kurt - 2016

The cost of systemic risk in the over-the-counter (OTC) derivatives market is described and estimated. Modern portfolio theory (MPT), applied to OTC derivatives, predicts this cost, which has been growing since 1970. This cost grew because Congress blocked MPT's predicted market forces. Without...

Persistent link: https://www.econbiz.de/10013004067

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

Loss sharing in central clearinghouses: winners and losers

Kubitza, Christian; Pelizzon, Loriana; Getmansky, Mila - 2021 - This version: February 16, 2021

-sectional differences in loss sharing benefits, and highlight alternative loss sharing rules and centralized trading as potential remedies. …

Persistent link: https://www.econbiz.de/10012438426

Loss sharing in central clearinghouses : winners and losers

Kubitza, Christian; Pelizzon, Loriana; Getmansky, Mila - 2023

Central clearing counterparties (CCPs) were established to mitigate default losses resulting from counterparty risk in derivatives markets. In a parsimonious model, we show that clearing benefits are distributed unevenly across market participants. Loss sharing rules determine who wins or loses...

Persistent link: https://www.econbiz.de/10014482946

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

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

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

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

Volatility Derivatives and Downside Risk

Lin, Yueh-Neng - 2016

The challenge in long volatility strategies is to minimize the cost of carrying such insurance due to negative roll yields and negative volatility risk premia. This study proposes a hedging strategy for volatility as an asset class that provides substantial protection against market crashes,...

Persistent link: https://www.econbiz.de/10012984895

The Zeeman Effect in Finance : Libor Spectroscopy and Basis Risk Management

Bianchetti, Marco - 2012

they are risky rates themselves.These simple empirical facts carry very important consequences in derivative's trading and …

Persistent link: https://www.econbiz.de/10013113679