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Siriwardane, Emil N.; Sunderam, Adi; Wallen, Jonathan L. - National Bureau of Economic Research - 2022

We use arbitrage activity in equity, fixed income, and foreign exchange markets to characterize the frictions and constraints facing intermediaries. The average pairwise correlation between the 29 arbitrage spreads that we study is 21%. These low correlations are inconsistent with canonical...

Persistent link: https://www.econbiz.de/10013435123

Measuring the Liquidity Impact on Catastrophe Bond Spreads

Zhao, Yang; Yu, Min‐Teh - 2023

This study measures liquidity in the catastrophe (CAT) bond market and the liquidity premium embedded in CAT bond … bond market is 67.57bps, accounting for only 9.42% of the average CAT bond spread (717.37bps) in the secondary market … during the period 2002-2016. The average CAT bond liquidity premium is higher than the corporate bond liquidity premium of a …

Persistent link: https://www.econbiz.de/10014355932

Term structure of interest rates with short-run and long-run risks

Grishchenko, Olesya V.; Song, Zhaogang; Zhou, Hao - In: The Journal of finance and data science : JFDS 8 (2022), pp. 255-295

interest rates - is a strong predictor of U.S. Treasury bond returns of maturities ranging between one and ten years for return … qualitatively replicates the predictability pattern of IRVRP for bond returns. …

Persistent link: https://www.econbiz.de/10014433708

Systematic risk of CDOs and CDO arbitrage

Hamerle, Alfred; Liebig, Thilo; Schropp, Hans-Jochen - 2009

"virtual" borrower or bond for which a single-factor model holds. Then, the correlation parameter is calculated via a non …-linear optimization. This "bond representation" allows to approximate the risk profile (expressed by the EL profile) using a single … for the corresponding bond representations is applied for valuation of the CDO tranches. Using a sample CDO portfolio …

Persistent link: https://www.econbiz.de/10003891104

Eine Analyse des Credit Spreads und seiner Komponenten als Grundlage für Hedge Strategien mit Kreditderivaten

Krones, Julia; Cremers, Heinz - 2012

In almost every financial market crisis we can observe widening credit spreads, especially in the last years during the subprime and sovereign debt crisis. But what exactly drives the credit spread? This paper will outline static components, i.e. default risk, liquidity, risk and the relative...

Persistent link: https://www.econbiz.de/10009576035

Examining the Validity of Credit Ratings Assigned to Credit Derivatives

Lee, Arthur C. - 2011

This paper examines the validity of ratings assigned by rating agencies on structured products: ABS and ABS CDO. The rating agencies have been criticized for assigning AAA ratings to the structured products created from mortgages. The ratings might give a false sense of confidence to investors...

Persistent link: https://www.econbiz.de/10013120564

A New Model for Pricing Collateralized OTC Derivatives

Xiao, Tim - 2018

This paper presents a new model for pricing OTC derivatives subject to collateralization. It allows for collateral posting adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized contract. This framework is very useful for valuing outstanding...

Persistent link: https://www.econbiz.de/10012936706

Bilateral Defaultable Financial Derivatives Pricing and Credit Valuation Adjustment

Xiao, Tim - 2019

The one-side defaultable financial derivatives valuation problems have been studied extensively, but the valuation of bilateral derivatives with asymmetric credit qualities is still lacking convincing mechanism. This paper presents an analytical model for valuing derivatives subject to default...

Persistent link: https://www.econbiz.de/10012867489

Pricing Financial Derivatives Subject to Multilateral Credit Risk and Collateralization

Xiao, Tim - 2019

This article presents a new model for valuing financial contracts subject to credit risk and collateralization. Examples include the valuation of a credit default swap (CDS) contract that is affected by the trilateral credit risk of the buyer, seller and reference entity. We show that default...

Persistent link: https://www.econbiz.de/10012867724

Options Trading and the Cost of Debt

Blanco, Iván - 2020

increase the potential for risk-shifting in firms. We explore these two channels via different tests on corporate bond yields …

Persistent link: https://www.econbiz.de/10012854724