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MULTI-FACTOR APPROACH FOR PRICING BASKET CREDIT LINKED NOTES UNDER ISSUER DEFAULT RISK

Wu, Po-Cheng - In: The International Journal of Business and Finance Research 5 (2011) 4, pp. 115-128

This article proposes a multi-factor approach to incorporate issuer default risk into basket credit linked note (BCLN) pricing based on the Gaussian copula. The numerical analysis demonstrates that the issuer default risk increases the fair coupon rate. Contradicting the common belief that a...

Persistent link: https://www.econbiz.de/10011206171

A COINTEGRATION TEST TO VERIFY THE HOUSING BUBBLE

Arshanapalli, Bala; Nelson, William - In: The International Journal of Business and Finance Research 2 (2008) 2, pp. 35-43

Housing prices in the US rose rapidly from 2000-2007Q3. Based on this evidence, the financial and general press concluded the US experienced a housing bubble. The efficient market theory denies the possibility of a bubble. This paper applies the statistical technique of cointegration to...

Persistent link: https://www.econbiz.de/10011206173

Model Risk in Variance Swap Rates

Alexander, Carol; Leontsinis, Stamatis - Henley Business School, University of Reading - 2011

Different theoretical and numerical methods for calculating the fair-value of a variance swap give rise to systematic biases that are most pronounced during volatile periods. For instance, differences of 10-20 percentage points would have been observed on fair-value index variance swap rates...

Persistent link: https://www.econbiz.de/10011206318

Discounting Cashflows from Illiquid Assets on Bank Balance Sheets

Nauta, Bert-Jan - Volkswirtschaftliche Fakultät, … - 2013

Most of the assets on the balance sheet of typical banks are illiquid. This exposes banks to liquidity risk, which is one of the key risks for banks. Since the value of assets is determined by their risks, liquidity risk should be included in valuation. This paper develops a valuation framework...

Persistent link: https://www.econbiz.de/10011207387

CrashMetrics: An Application for Colombia

Gómez, Esteban; Mendoza, Juan Carlos; Gómez, Nancy Zamudio - Banco de la Republica de Colombia

The financial crisis of the late 2000's highlighted the importance of strengthening risk management systems in financial markets. Consequently, an increasing interest in strategies to quantify risk under extreme scenarios has spawned. One of such techniques is CrashMetrics, a methodology for...

Persistent link: https://www.econbiz.de/10010558573

The influence of differences in accounting standards on empirical pricing models: An application to the Fama-French model

Biscarri, Javier Gomez; Espinosa, Germán López - School of Economics and Business Administration, …

We analyze the effect of cross-country differences in accounting standards on the empirical performance of financial pricing models. We show how the lack of uniform accounting standards across countries generates inconsistent estimates of the model parameters, and leads to rejection of the...

Persistent link: https://www.econbiz.de/10010559852

Illiquidity and asset pricing in the Chinese stock market

Wang, Maobin; Kong, Dongmin - In: China Finance Review International 1 (2010) December, pp. 57-77

Purpose–Since illiquidity risk is one of the most important pricing factors of assets, the aim of this paper is to evaluate the suitability of proxies of illiquidity prevalent in the asset pricing literature and their explanatory power in asset pricing tests....

Persistent link: https://www.econbiz.de/10010561532

Simulated Maximum Likelihood Estimation of Continuous Time Stochastic Volatility Models

Kleppe, Tore Selland; Skaug, Hans J.; Yu, Jun - School of Economics, Singapore Management University - 2009

In this paper we develop and implement a method for maximum simulated likelihood estimation of the continuous time stochastic volatility model with the constant elasticity of volatility. The approach do not require observations on option prices nor volatility. To integrate out latent volatility...

Persistent link: https://www.econbiz.de/10010561669

Robust Deviance Information Criterion for Latent Variable Models

Li, Yong; Zeng, Tao; Yu, Jun - School of Economics, Singapore Management University - 2012

It is shown in this paper that the data augmentation technique undermines the theoretical underpinnings of the deviance information criterion (DIC), a widely used information criterion for Bayesian model comparison, although it facilitates parameter estimation for latent variable models via...

Persistent link: https://www.econbiz.de/10010562112

Detecting Bubbles in Hong Kong Residential Property Market

Yiu, Matthew S.; Yu, Jun; Jin, Lu - School of Economics, Singapore Management University - 2012

This study uses a newly developed bubble detection method (Phillips, Shi and Yu, 2011) to identify real estate bubbles … in the Hong Kong residential property market. Our empirical results reveal several positive bubbles in the Hong Kong … addition, the method identifies two negative bubbles in the data, one in 2000 and the other one in 2001. These empirical …

Persistent link: https://www.econbiz.de/10010562113