This study develops a hypothesis from asset pricing theory and optimization theory that in a diversified portfolio of equity securities there is no linear relationship between equilibrium equity returns and financial reporting variables subject to managerial discretion, only a nonlinear...

Equity markets fail to account for value-relevant non-public information enjoyed by syndicated loan participants and reflected in publicly-posted loan prices. A long-short strategy that buys (sells) the equities of firms whose loans have recently appreciated (depreciated) earns large...

I develop a search-and-bargaining model of endogenous intermediation in over-the-counter markets. Unlike the existing work, my model allows for rich investor heterogeneity in three simultaneous dimensions: preferences, inventories, and meeting rates. By comparing trading-volume patterns that...

The aim of this paper is to present and briefly analyse the provisions of the recent (24 May 2018) European Commission's proposal for a Regulation of the European Parliament and the Council, whose objective is to lay down a general framework for sovereign bond-backed securities (SBBSs). It is...

The way central banks manage their foreign reserve assets has evolved over the past decades. One major trend is managing reserves in two or more tranches-liquidity tranche and investment tranche-especially for those with adequate reserves. Incorporating reserve tranching, we have developed in...

We model the role of dealers in information diffusion in over-the-counter (OTC) markets. A dealer maintains relationships with a network of both informed customers who trade to profit from private information pertaining to asset values and risk-averse liquidity customers who trade to meet...

This paper proposes a simple and crude way of approximating the XVA sensitivities. In short, the idea is simply to recycle the existing base simulated portfolio values for the bumped ones. This is done by re-simulating the risk factors for the bumped market and finding out which other base state...

We provide detailed descriptions, including over 550 mathematical formulas, for over 150 trading strategies across a host of asset classes (and trading styles). This includes stocks, options, fixed income, futures, ETFs, indexes, commodities, foreign exchange, convertibles, structured assets,...

There is an increasing consensus within banks, on the need to recognize the impact of rising capital requirements on their derivative business in the form of capital valuation adjustment (KVA). However, because of varied reasons, there are still concerns over how exactly KVA should be computed,...

Financial intermediaries often use stress testing to set risk exposure limits. Accordingly, we examine a model with an agent who faces stress testing constraints and another who does not. Three results are obtained. First, when there are K* binding constraints, the constrained agent's optimal...