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Collateral Convexity of Libor and FX Forwards (Slides)
McCloud, Paul - 2014
Collateral discounting recognises the value of funding for derivatives, which has gained prominence in recent years as … basis spreads have widened in response to the financial crises. This article considers the impact of collateral volatility … expressions are derived for convexity adjustments and collateral options, in a form that easily integrates into curve building and …
Persistent link: https://www.econbiz.de/10013054566
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Collateral Haircuts and Bond Yields in the European Government Bond Markets
Nguyen, Minh - 2020
Analyzing a novel collateral haircut dataset, this paper investigates the relations between the collateral haircuts and … bonds with higher collateral haircuts. The importance of collateral haircuts on bond yields remains robust after controlling …
Persistent link: https://www.econbiz.de/10012851746
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Understanding Mortgage Spreads
Boyarchenko, Nina; Fuster, Andreas; Lucca, David O. - 2014
Spreads of agency mortgage-backed securities (MBS) vary significantly in the cross section and over time, but the sources of this variation are not well understood. We document that, in the cross section, MBS spreads adjusted for the prepayment option show a pronounced smile with respect to the...
Persistent link: https://www.econbiz.de/10010404146
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Arbitrage-free models of stocks and bonds
Durham, J. Benson - 2013
A small but ambitious literature uses affine arbitrage-free models to estimate jointly U.S. Treasury term premiums and the term structure of equity risk premiums. Within this approach, this paper identifies the parameter restrictions that are consistent with a simple dividend discount model,...
Persistent link: https://www.econbiz.de/10010222892
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What Interest Rate Models to Use? Buy Side Versus Sell Side
Nawalkha, Sanjay K. - 2011
Does the selection of a specific interest rate model to use for pricing, hedging, and risk-return analysis depend upon whether the user is a buy-side institution or a sell-side dealer bank? Sanjay Nawalkha and Riccardo Rebonato debate this question in this paper and provide some insightful...
Persistent link: https://www.econbiz.de/10013132282
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The Impact of Liquidity on Senior Credit Spreads During the Subprime Crisis
Marra, Miriam - 2013
This paper examines the effects of liquidity during the 2007-09 crisis, focussing on the senior tranche of the CDX.NA.IG Index and on Moody's AAA Corporate Bond Index. The aim is to understand whether these senior credit indices were discounted below fair value and to what extent this discount...
Persistent link: https://www.econbiz.de/10013084230
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Predicting Commodity-Futures Basis Factor Return by Basis Spread
Kim, Daehwan - 2014
A growing body of literature confirms the significance of the commodity futures basis factor: It has a significantly positive premium and it explains the cross-section of commodity-futures excess returns. We extend the literature by documenting predictive relation between this factor and the...
Persistent link: https://www.econbiz.de/10013065562
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Time-Varying Risk Premiums and Term Premiums in Commodity Futures
Chaves, Denis B. - 2017
Term premiums, defined as the excess return of long-dated contracts over short-dated contracts, in commodity futures are strongly predictable, both in the time series and in the cross section, by roll yield spreads. Strategies that exploit this predictability show sizable Sharpe ratios and are...
Persistent link: https://www.econbiz.de/10012959999
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Yields versus Expected Returns of Corporate Bonds : Some Unexpected Results
Beliaeva, Natalia - 2019
We derive expected bond return equations for various structural credit valuation models with alternative stochastic processes and boundary conditions for default given in Merton [1974], Merton [1976], Black and Cox [1976], Heston [1993], Longstaff and Schwartz [1995], and Collin-Dufresne and...
Persistent link: https://www.econbiz.de/10012900804
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The Valuation of Fixed Term Securities Lending in a Multi-Curve Framework
Conze, Antoine - 2019
. We show that a convexity adjustment arises from the collateral basis being applied to an unnatural notional proportional … to the lent security price rather than to the collateral instrument(s) price(s). In practical cases the convexity …
Persistent link: https://www.econbiz.de/10012891103