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Term Structure of Hedging Premia and Basis Arbitrages in Synthetic-Cash Credit Market
Colozza, Tommaso - 2016
This paper investigates the price formation of credit risk premia across European sovereign countries. A metric of such premia is retrieved under the statistical measure using bootstrap techniques on hedging portfolios. This latter is retrieved in the cash-synthetic market by means of comparison...
Persistent link: https://www.econbiz.de/10012982998
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Minimal Variance Hedging in Multi-Curve Interest Rate Modeling
Hess, Markus - 2019
We consider minimal variance hedging in a pure-jump multi-curve interest rate model. In the first part, we derive arithmetic multi-factor martingale representations for the spread, OIS and LIBOR rate which are bounded from below by a real-valued constant. In the second part, we investigate...
Persistent link: https://www.econbiz.de/10012902260
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Credit Default Swaps in General Equilibrium : Endogenous Default and Credit Spread Spillovers
Darst, Matthew - 2018
This paper shows that credit default swaps (CDS) can affect the type of debt firms issue. Firms face a trade-off between investment scale and the cost of capital measured by the credit spread. Small-scale investment is safe, fully collateralized, but earns modest profits in all states....
Persistent link: https://www.econbiz.de/10012938470
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An Arithmetic Pure-Jump Multi-Curve Interest Rate Model
Hess, Markus - 2020
We propose an innovative multi-curve model involving interest rates and (ordered) spreads which are modeled by arithmetic martingale processes being larger than some arbitrarily chosen constant. Under our mean-reverting pure-jump approach, we derive tractable martingale representations for the...
Persistent link: https://www.econbiz.de/10012855289
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Credit Default Swaps in General Equilibrium : Spillovers, Credit Spreads, and Endogenous Default
Darst, Matthew - 2016
This paper highlights two new effects of credit default swap markets (CDS) in a general equilibrium setting. First, when firms' cash flows are correlated, CDSs impact the cost of capital{credit spreads{and investment for all firms, even those that are not CDS reference entities. Second, when...
Persistent link: https://www.econbiz.de/10012992726
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Term Risk in Interest Rate Markets
Macrina, Andrea; Mahomed, Obeid - 2021
Based on a stylised financial system along with a systemic perspective thereof, we consider the structure of an aggregated banking system that is vulnerable to liquidity risks. Within this setup, a consistent mathematical modelling framework for term interest rate systems is derived that enables...
Persistent link: https://www.econbiz.de/10013321542
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A Note to Correct Modeling Term Structures of Defaultable Bonds
Kang, Dae Il - 2010
bonds. The error reveals inconsistency through their model in the sense that Heath, Jarrow, and Morton construct no-arbitrage …
Persistent link: https://www.econbiz.de/10013141807
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No-Arbitrage Near-Cointegrated Var(p) Term Structure Models, Term Premia and GDP Growth
Jardet, Caroline - 2011
The recent macro-finance yield curve literature does not agree neither about term premia empirical properties nor about the importance or even the direction of its relationship with future economic activity. This paper proposes a two-step approach to handle both problems. First, in a VAR...
Persistent link: https://www.econbiz.de/10013132933
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Optimal Portfolio Selection in Nonlinear Arbitrage Spreads
Alsayed, Hamad - 2011
This paper analytically solves the portfolio optimization problem of an investor faced with a risky arbitrage … important risk factors inherent in arbitrage trading. While these factors are absent from the standard OU, we show that …
Persistent link: https://www.econbiz.de/10013133492
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The Explicit Form of No Arbitrage Condition When the Term Structure Model is Multi-Factor
Medvedev, Gennady - 2009
The no arbitrage conditions are derived in the explicit form for the market, where the zero coupons bonds of various … assets is extended on case of any number of assets and inflation. The no arbitrage condition for multi-factor models of a … obtained at first, and then for want of it fulfillment the no arbitrage condition is derived …
Persistent link: https://www.econbiz.de/10013156291