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Arbitrage-free bilateral counterparty risk valuation under collateralization and application to credit default swaps

Brigo, Damiano; Capponi, Agostino; Pallavicini, Andrea - In: Mathematical finance : an international journal of … 24 (2014) 1, pp. 125-146

Persistent link: https://www.econbiz.de/10010256178

Causality between arbitrage and liquidity in platinum futures

Iwatsubo, Kentaro; Watkins, Clinton - In: Journal of risk and financial management : JRFM 15 (2022) 12, pp. 1-17

Arbitrage and liquidity are interrelated. Liquidity facilitates arbitrageurs’ trading on deviations from the law of one … price. However, whether arbitrage opportunity leads to an increase or decrease in liquidity depends on the cause of the … deviation. A demand shock leads to greater liquidity, while asymmetric information is toxic to liquidity. We examine how …

Persistent link: https://www.econbiz.de/10014284282

Default dependence : the equity default relationship

Turnbull, Stuart M. (contributor); Yang, Jun (contributor) - 2008

The paper examines three equity-based structural models to study the nonlinear relationship between equity and credit default swap (CDS) prices. These models differ in the specification of the default barrier. With cross-firm CDS premia and equity information, we are able to estimate and compare...

Persistent link: https://www.econbiz.de/10003641322

Modeling default dependence with threshold models

Overbeck, Ludger; Schmidt, Wolfgang M. - 2003

We investigate the problem of modeling defaults of dependent credits. In the framework of the class of structural default models we study threshold models where for each credit the underling ability-to-pay process is a transformation of a Wiener processes. We propose a model for dependent...

Persistent link: https://www.econbiz.de/10003853455

Giesecke, Kay - 2001

We propose a model of correlated multi-firm default with incomplete information. While public bond investors observe issuers' assets and defaults, we suppose that they are not informed about the threshold asset level at which a firm is liquidated. Bond investors form instead a prior on these...

Persistent link: https://www.econbiz.de/10009621426

Sovereign credit risk and stock markets : does the markets’ dependency increase with financial Distress?

Silva, Paulo Pereira da - In: International Journal of Financial Studies : open … 2 (2014) 1, pp. 145-167

This paper addresses the relationship between stock markets and credit default swaps (CDS) markets. In particular, I aim to gauge if the co-movement between stock prices and sovereign CDS spreads increases with the deterioration of the credit quality of sovereign debt. The analysis of...

Persistent link: https://www.econbiz.de/10010373349

Illiquidity transmission from spot to futures markets

Korn, Olaf; Krischak, Paolo; Theissen, Erik - 2014

futures market, but rather interacts with price risk, liquidity risk, and the risk aversion of the market maker. The … liquidity link between spot and futures markets. Our results provide no evidence in favor of the substitution hypothesis. …

Persistent link: https://www.econbiz.de/10010399342

Costly External Finance, Liquidity Risk, and Default Risk

Yang, Jun - 2011

-term funding needs at the onset of the crisis by exploiting ex-ante variation in long-term debt structure. I also compute excess …

Persistent link: https://www.econbiz.de/10013128496

Modelling Default Risk : A New Structural Approach

Yildirim, Yildiray - 2011

This paper provides an alternative approach to the structural credit risk models. The first-passage-time approach extends the original Merton (Journal of Finance 29, 449-470) model by accounting for the fact that the default may occur not only at the debt's maturity, but also prior to this date....

Persistent link: https://www.econbiz.de/10013130480

Levy Subordinator Model : A Two Parameter Model of Default Dependency

Balakrishna, B.S. - 2011

The May 2005 crisis and the recent credit crisis have indicated to us that any realistic model of default dependency needs to account for at least two risk factors, firm-specific and catastrophic. Unfortunately, the popular Gaussian copula model has no identifiable support to either of these. In...

Persistent link: https://www.econbiz.de/10013132621

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