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Substitution Costs in Managed Synthetic CDOs
O'Kane, Dominic - 2013
Managed synthetic CDOs permit the dynamic substitution of credits in the reference portfolio. The expectation of investors in is that a skilled manager should be able to identify deteriorating credits before they experience a credit event and should therefore be able to remove the credit from...
Persistent link: https://www.econbiz.de/10013072231
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Implicit Entropic Market Risk-Premium from Interest Rate Derivatives
Arismendi Zambrano, Juan Carlos - 2020
Implicit in interest rate derivatives are Arrow-Debreu prices (or state price densities, SPDs) that contain fundamental information for risk and portfolio management in interest rate markets. To extract such information from interest rate derivatives, we propose a non-parametric method to...
Persistent link: https://www.econbiz.de/10012828071
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Compressing over-the-counter markets
D'Errico, Marco; Roukny, Tarik - 2017
original trading relationships. Third, we apply our framework to a unique and comprehensive transaction-level dataset on OTC …
Persistent link: https://www.econbiz.de/10011976943
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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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The Valuation of Financial Derivatives Subject to Counterparty Risk and Credit Value Adjustment
Xiao, Tim - 2019
This article presents a generic model for pricing financial derivatives subject to counterparty credit risk. Both unilateral and bilateral types of credit risks are considered. Our study shows that credit risk should be modeled as American style options in most cases, which require a backward...
Persistent link: https://www.econbiz.de/10012864519
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Do Position Limits on Futures Trading Benefit Commodity Markets?
Chen, Wen; Hu, Bo; Wang, Yajun - 2022
We develop a model to study the impacts of speculative position limits in commodity futures market. In the spirit of … Dodd-Frank Act, regulators believe that position limit on speculators would dampen futures price volatility and prevent … market manipulation. We show that this is not true due to two unintended consequences of this trading rule. First, the …
Persistent link: https://www.econbiz.de/10014235601
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Cash CVA -- Credit Valuation Adjustment in the Cash Form
Lou, Wujiang - 2021
liquid following massive dealer-bank exit from CDS trading business post the Financial Crisis of 2007-2008, while bond … liquidity has significantly improved due to advances in corporate bond electronic trading …
Persistent link: https://www.econbiz.de/10013230524
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Valuation of Mortgage-Backed Securities : A Portfolio Credit Derivatives Approach
Lou, Wujiang - 2013
Non-agency mortgage-backed securities (MBS) are typically priced and traded on discounted cashflow basis where a cashflow projection is made under a prepayment and default scenario and discounted with a discount margin (DM) that supposedly measures credit risk. Whilest simple and intuitive to...
Persistent link: https://www.econbiz.de/10012710689
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Volatility dependent structured products
Dyachenko, Artem; Farkas, Walter; Rieger, Marc Oliver - 2019
We construct a derivative that depends on the SPY and VIX and, in this way, incorporates both the market risk premium and the variance risk premium. We show that the product's Sharpe ratio is higher than the SPY Sharpe ratio. If we invest $10000 into the product, the products' payoff is around...
Persistent link: https://www.econbiz.de/10012177147
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Valuation and Optimal Exercise of Derivatives Under Private Information
Haug, Jørgen - 2020
We provide an easy-to-use model that values derivatives for a privately informed agent. We introduce private forward prices that conveniently format private information for inclusion in a standard no-arbitrage framework. This framework yields simple expressions for the privately-informed value...
Persistent link: https://www.econbiz.de/10012852503