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Systemic risk and the refinancing ratchet effect
Khandani, Amir E.; Lo, Andrew W.; Merton, Robert C. - 2009 - This draft: September 13, 2009
The confluence of three trends in the U.S. residential housing market - rising home prices, declining interest rates, and near-frictionless refinancing opportunities - led to vastly increased systemic risk in the financial system. Individually, each of these trends is benign, but when they occur...
Persistent link: https://www.econbiz.de/10003889053
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Foreign Reserve Management and U.S. Money Market Liquidity : A Cost of Exorbitant Privilege
Alquist, Ron; Kahn, R. Jay; Dilts Stedman, Karlye - 2022
significant changes in U.S. money market liquidity. We develop a model in which U.S. money market spreads respond to foreign … central banks’ exchange-rate management decisions. Foreign central banks remove liquidity from U.S. money markets and cause … spreads to widen by selling Treasuries to supply liquidity to their financial systems. Our analysis focuses on the major oil …
Persistent link: https://www.econbiz.de/10013492068
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The pricing of subprime mortgage risk in good times and bad : evidence from the ABX.HE indices
Fender, Ingo; Scheicher, Martin - 2009
, liquidity and risk appetite. The results imply that declining risk appetite and heightened concerns about market … liquidity risk, particularly in periods of heightened market pressure. In addition, as related risk premia can be captured by …
Persistent link: https://www.econbiz.de/10003866554
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Meteorological forecasts and the pricing of weather derivatives
Ritter, Matthias; Mußhoff, Oliver; Odening, Martin - 2010
In usual pricing approaches for weather derivatives, forward-looking information such as meteorological weather forecasts is not considered. Thus, important knowledge used by market participants is ignored in theory. By extending a standard model for the daily temperature, this paper allows the...
Persistent link: https://www.econbiz.de/10008663382
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Measures of aggregate credit conditions and their potential use by central banks
García, Alejandro; Prokopiw, Andrei - 2009
the type of risk priced in corporate bonds (i.e., credit or liquidity risk). However, although the two models provide …
Persistent link: https://www.econbiz.de/10003933233
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Does time have value? : an empirical examination of the put option embedded in refundable US air fares
Sturm, Ray R.; Winters, Drew B. - In: Journal of economics and finance 33 (2009) 4, pp. 376-392
Persistent link: https://www.econbiz.de/10003933764
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The term structure of risk premia : new evidence from the financial crisis
Berg, Tobias - 2010
This study calibrates the term structure of risk premia before and during the 2007/2008 financial crisis using a new calibration approach based on credit default swaps. The risk premium term structure was flat before the crisis and downward sloping during the crisis. The instantaneous risk...
Persistent link: https://www.econbiz.de/10003971282
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Realizing smiles: pricing options with realized volatility
Corsi, Fulvio; Fusari, Nicola; Vecchia, Davide la - 2010
We develop a discrete-time stochastic volatility option pricing model, which exploits the information contained in high-frequency data. The Realized Volatility (RV) is used as a proxy of the unobservable log-returns volatility. We model its dynamics by a simple but effective (pseudo) long memory...
Persistent link: https://www.econbiz.de/10003973052
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Valuing the Treasury’s Capital Assistance Program/ Paul Glasserman; Zhenyu Wang
Glasserman, Paul; Wang, Zhenyu - 2009
The Capital Assistance Program (CAP) was created by the U.S. government in February 2009 to provide backup capital to large financial institutions unable to raise sufficient capital from private investors. Under the terms of the CAP, a participating bank receives contingent capital by issuing...
Persistent link: https://www.econbiz.de/10003948201
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The forward premium puzzle and latent factors day by day
Bernoth, Kerstin; Hagen, Jürgen von; Vries, Casper G. de - 2010
We use futures instead of forward rates to study the complete maturity spectrum of the forward premium puzzle from two days to six months. At short maturities the slope coefficient is positive, but these turn negative as the maturity increases to the monthly level. Futures data allow us to...
Persistent link: https://www.econbiz.de/10003949496