arbitrage crashes and failure of systemically important intermediaries during the global financial crisis. Intermediaries pledge … productive capital as repo collateral to fund the margin for their arbitrage positions. A tiny drop in the market liquidity of … movements and losses. This further reduces the collateral value of arbitrage portfolios and triggers more fire-sales in both …

straightforward derivation of the no-arbitrage dynamics of forward rates and forward credit spreads. The model can be calibrated to … the prices of defaultable coupon bonds, asset swap rates and default swap rates for which closed-form solutions are given … formula for options on default swaps is made exact in a modified modelling framework using an analogy to the swap measure, the …

path-wise comparison of the approximations and give applications to the valuation of the swaption and the trigger swap. …