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Does Debt Explain the Investment Premium?

Poulsen, Thomas K. - 2018

explanations of the investment premium including the q-theory of investment and behavioral finance. To explain the evidence, I …

Persistent link: https://www.econbiz.de/10012907925

Expected Equity Returns Should Correlate with Idiosyncratic Risk

Bruno, Giovanni - 2018

law of one price, and is present in all but risk-neutral economies. We test the cross-sectional predictions of our theory … equity than for assets, and stronger for more levered firms — consistent with the theory. We test also the timeseries … implications of the theory. Time variation in asset ivol causes time variation in the option value of equity that translates into …

Persistent link: https://www.econbiz.de/10012910108

Artificial Neural Network Approach to Counterparty Credit Risk and XVA

Welack, Sven - 2019

Novel approaches employing an Artificial Neural Networks to enhance the infrastructure of existing Monte Carlo Risk engines are presented. An Artificial Neural Network is utilized to retrieve trade- and market data from existing Expected Exposure profiles of interest rate swaps which enables its...

Persistent link: https://www.econbiz.de/10012895298

Corporate Hedging and the Variance of Stock Returns

Biguri, Kizkitza - 2019

By means of a difference-in-differences approach (sigma-DID), we investigate the effect that hedging has on corporate risk. Examining the relation between hedging and the idiosyncratic variance of stock returns, we show that when new commodity derivatives are introduced in the Chicago Mercantile...

Persistent link: https://www.econbiz.de/10012899849

Derivatives Hedging, Capital and Leverage

Prampolini, Andrea - 2018

In this work Massimo Morini and Andrea Prampolini argue that KVA is a component of profit turned into a valuation adjustment as a by-product of regulatory constraints based on a conservative consideration of market hedges. The regulatory foundations of KVA are analyzed from RWAs to the Leverage...

Persistent link: https://www.econbiz.de/10012936693

ETD vs. OTCD : Counterparty Risk and Capital Requirements for Exchange Traded Derivatives

Bianchetti, Marco - 2018

It is common belief that Exchange Traded Derivatives (ETDs), e.g. Futures and Futures Options, are collateralized plain vanilla financial instruments carrying low counterparty risk and capital requirements with respect to corresponding Over The Counter Derivatives (OTCDs). In this paper we...

Persistent link: https://www.econbiz.de/10012937762

CoCo Bonds with Extension Risk

De Spiegeleer, Jan - 2014

This article provides an in-depth analysis of the pricing and structuring of contingent convertibles (CoCos) with extension risk. Under the new regulatory Basel III framework, CoCo bonds can be categorised as either belonging to the Additional Tier 1 or Tier 2 capital category. The Tier 1 CoCo...

Persistent link: https://www.econbiz.de/10013059528

Contraction Options : Implications for the Profitability-Return Relation and Momentum Profits

Shim, Kyung Hwan - 2015

We develop a firm valuation model with repeated expansion and contraction options to show operating profitability is a proxy for time-varying systematic risk. Relative to riskier assets, the proportionate value of contraction options increase as profitability falls, lowering the firm beta....

Persistent link: https://www.econbiz.de/10013026825

Chebyshev Greeks : Smoothing Gamma without Bias

Maran, Andrea; Pallavicini, Andrea; Scoleri, Stefano - 2021

The computation of Greeks is a fundamental task for risk managing of financial instruments. The standard approach to their numerical evaluation is via finite differences. Most exotic derivatives are priced via Monte Carlo simulation: in these cases, it is hard to find a fast and accurate...

Persistent link: https://www.econbiz.de/10013220500

Option-Based Intermediary Leverage

Grünthaler, Thomas; Lorenz, Friedrich; Meyerhof, Paul - 2021

We introduce an option-implied proxy for the health of ﬁnancial intermediaries—the Leverage Bearing Capacity (LBC). LBC is the leverage of a ﬁctitious intermediary that targets a ﬁxed level of risk and rebalances its capital structure on an ongoing basis. Our measure is based on market...

Persistent link: https://www.econbiz.de/10013222130