This study estimates the parameters of credit derivatives, equity derivatives and structural models for bank recapitalisation in Nigeria by employing contingent convertibles (CoCos) and using the Nigeria Treasury Bill rate for 2009 as the risk-free rate, estimated recapitalisation requirements...

Inflationsgebundene Finanzprodukte: Einblicke in eine innovative Assetklasse – Märkte, Bewertung und Einsatzmöglichkeiten – Inflationsindexierte Finanzprodukte bereichern den Kapitalmarkt um eine Assetklasse, die die gezielte Absicherung gegen das Inflationsrisiko erlaubt. Sie zeichnen...

This paper develops a formula to numerically estimate the unsubsidized, fair-market value of the toxic assets purchased with Federal Reserve loans. It finds that subsidy rates on these loans were on average 33.9 percent at origination. In contrast, by the 3rd quarter of the 2010, there was on...

This study estimates the parameters of credit derivatives, equity derivatives and structural models for bank recapitalisation in Nigeria by employing contingent convertibles (CoCos) and using the Nigeria Treasury Bill rate for 2009 as the risk-free rate, estimated recapitalisation requirements...

We show how the timing of financial innovation might have contributed to the mortgage bubble and then to the crash of 2007-2009. We show why tranching and leverage first raised asset prices and why CDS lowered them afterward. This may seem puzzling, since it implies that creating a derivative...

A model is presented of bank behaviour which identifies the factors determining a bank's optimal capital/asset ratio, its optimal liquidity ratio, the expected value of non-performing loans and the probability of bank failure. We propose that this last variable can act as an index of bank...

Credit default swaps (CDSs) are term insurance contracts written on traded bonds. This review studies the economics of CDSs using the economics of insurance literature as a basis for analysis. It is alleged that trading in CDSs caused the 2007 credit crisis, and therefore trading CDSs is an evil...

We analyze the implication of a bailout package including a loan guarantee and a direct equity capital injection on the equity risk of a distressed bank at the taxpayer costs. The lending function with a loan guarantee of the bank creates the need to model equity as a down-and-out call (DOC)...

In this paper we present a model of executive compensation to analyze the link between incentive compensation and risk taking. Our model takes into account the loss in the value of an executive's expected wealth from employment if the firm becomes insolvent during a bad state of the economy. We...

This paper focuses on the asymptotic single-risk-factor (ASRF) model in order to analyze the impact of specification and calibration errors on popular measures of portfolio credit risk. Violations of key assumptions of this model are found to be virtually inconsequential, especially for large,...