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Temporal Effects in Index CDS Trading and Liquidity

Xu, Weike - 2020

) trading and liquidity. We find strong intraday variations in index CDS trading activities and liquidity. Unlike the U … findings improve our understanding of the trading costs and liquidity in the over-the-counter derivatives market …

Persistent link: https://www.econbiz.de/10012833364

Hedging-Induced Correlation in Illiquid Markets

Brøgger, Søren Bundgaard - 2020

I develop a model with two assets in which the hedging activity of derivatives dealers, interacting with market illiquidity, distorts the covariance structure of the market. I apply the model to hedging of counter party risk, and find strong support for the model's key predictions. Using...

Persistent link: https://www.econbiz.de/10012834282

Extracting Option-Implied Probability of Default : A Novel Method

Orosi, Greg - 2019

In this paper, we present a novel method to extract the risk-neutral probability of default from American put option prices. Under the assumptions of Carr and Wu (2011), we derive a closed form expression for American put options from which the probability of default can be inferred. Our...

Persistent link: https://www.econbiz.de/10012863513

Healthy... Distress... Default

Kakushadze, Zura - 2019

We discuss a simple, exactly solvable model of stochastic stock dynamics that incorporates regime switching between healthy and distressed regimes. Using this model, which is analytically tractable, we discuss a way of extracting expected returns for stocks from realized CDS spreads,...

Persistent link: https://www.econbiz.de/10012863946

Blocktrades in OTC Options Markets : Price Impact and Liquidity Effects

Kiesel, Ruediger - 2019

years before and during the financial crisis 2008. We find significant differences in prices and provided liquidity …

Persistent link: https://www.econbiz.de/10012867967

The Effects of Liquidity on the Price Discovery Process in Credit Derivatives Markets in Times of Financial Distress

Peña, Juan Ignacio - 2019

This paper analyses the role of liquidity in the price discovery process. Specifically, it focuses on the credit …

Persistent link: https://www.econbiz.de/10012868923

Conic Quantization : Stochastic Volatility and Market Implied Liquidity

Fiorin, Lucio - 2019

market implied liquidity, linking the pricing under stochastic volatility with the Conic Finance theory of two prices. As a … motivating example, we construct for the first time the market implied liquidity surface under stochastic volatility …

Persistent link: https://www.econbiz.de/10012893828

Macro Factors in Corporate Bond Credit and Liquidity Spreads

Guo, Biao - 2019

spreads, and corporate bond liquidity spreads in a unified no-arbitrage framework. Four economic factors, monetary conditions …. During the pre-crisis period, volatility shocks decrease Treasury yields and widen both credit spreads and liquidity spreads … and real output become significant as well. Ignoring the liquidity component of corporate yield spreads is shown to lead …

Persistent link: https://www.econbiz.de/10012896270

Firm Heterogeneity and Credit Risk Diversification

Pesaran, M. Hashem - 2013

This paper considers a simple model of credit risk and derives the limit distribution of losses under different assumptions regarding the structure of systematic and idiosyncratic risks and the nature of firm heterogeneity. It documents a rich and complex interaction between the underlying model...

Persistent link: https://www.econbiz.de/10012754519

A Market-Based Framework for Bankruptcy Prediction

Reisz, Alexander - 2004

We estimate probabilities of bankruptcy for 5,784 industrial firms in the period 1988-2002 in a model where common equity is viewed as a down-and-out barrier option on the firm's assets. Asset values and volatilities as well as firm-specific bankruptcy barriers are simultaneously backed out from...

Persistent link: https://www.econbiz.de/10012738341