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Endogenous Recovery and Replication of A Segregated Derivatives Economy with Counterparty Credit, Collateral, and Market Funding

Lou, Wujiang - 2016

We cast the ongoing debate on FVA onto a segregated derivative economy, where counterparties are defaultable and unable … to post collateral fully. The economy exhibits funding asymmetry in that deposit and borrowing have differing rates. A …

Persistent link: https://www.econbiz.de/10013007738

Synthetic CDO Pricing : The Perspective of Risk Integration

Hu, Conghui - 2015

The underlying asset pool of collateral debt obligations (CDOs) simultaneously encompasses credit risk and market risk …

Persistent link: https://www.econbiz.de/10013013661

An Equilibrium Model for the OTC Derivatives Market with a Collateral Agreement

Takino, Kazuhiro - 2015

collateral agreement. We then verify the effect of the collateral agreement on the derivative transaction by using the … derivative contracts by agent's utility maximizations. This leads the equilibrium volumes and prices for the derivative contracts …, and enables us to observe the influence of the collateral agreement on these. Our numerical results also verify how the …

Persistent link: https://www.econbiz.de/10013014285

An Equilibrium Pricing for OTC Derivatives with Collateralization. Application of Economic Premium Principle

Takino, Kazuhiro - 2016

principle initiated by Buhlmann (1980). The derivative markets in our model are over-the-counter (OTC) markets and have … the collateral agreements. We also demonstrate whether our pricing approach is consistent with an another equilibrium … pricing rule in the point of the sensitivity of derivative prices …

Persistent link: https://www.econbiz.de/10012999558

CDO Pricing with Copulae

Choroś-Tomczyka, Barbara - 2017

Modeling the portfolio credit risk is one of the crucial issues of the last years in the financial problems. We propose the valuation model of Collateralized Debt Obligations based on a one- and two-parameter copula and default intensities estimated from market data. The presented method is used...

Persistent link: https://www.econbiz.de/10012966277

Interest rate swap credit valuation adjustment

Černý, Jakub; Witzany, Jiří - 2014

of the derivative, but also the probability of default of a counterparty. Another complication arises in the calculation …

Persistent link: https://www.econbiz.de/10010358352

Discrete-time option pricing with stochastic liquidity

Leippold, Markus; Schärer, Steven - 2016

Classical option pricing theories are usually built on the law of one price, neglecting the impact of market liquidity that may contribute to significant bid-ask spreads. Within the framework of conic finance, we develop a stochastic liquidity model, extending the discrete-time constant...

Persistent link: https://www.econbiz.de/10011515968

Stock Illiquidity, option prices, and option returns

Kanne, Stefan; Korn, Olaf; Uhrig-Homburg, Marliese - 2016 - Current version: July 2016

We provide evidence of a strong effect of the underlying stock's illiquidity on option prices by showing that the average absolute difference between historical and implied volatility increases with stock illiquidity. This pattern translates into significant excess returns of option trading...

Persistent link: https://www.econbiz.de/10011539242

Jumps in option prices and their determinants : real-time evidence from the E-mini S&P 500 option market

Kapetanios, George; Neumann, Michael; Skiadopoulos, George - 2014

We study the real-time characteristics and drivers of jumps in option prices. To this end, we employ high frequency data from the 24-hour E-mini S&P 500 options market. We find that option prices do not jump simultaneously across strikes and maturities and are uncorrelated with jumps in the...

Persistent link: https://www.econbiz.de/10010472845

Understanding Mortgage Spreads

Boyarchenko, Nina; Fuster, Andreas; Lucca, David O. - 2014

Spreads of agency mortgage-backed securities (MBS) vary significantly in the cross section and over time, but the sources of this variation are not well understood. We document that, in the cross section, MBS spreads adjusted for the prepayment option show a pronounced smile with respect to the...

Persistent link: https://www.econbiz.de/10010404146