The use of CVA to cover credit risk is widely spread, but has its limitations. Namely, dealers face the problem of the illiquidity of instruments used for hedging it, hence forced to warehouse credit risk. As a result, dealers tend to offer a limited OTC derivatives market to highly risky...

We study the default behavior of original issue high-yield bonds to answer the open question of how the probability of default changes over time. We use a flexible econometric method, the Cox proportional hazard, to model the default behavior of junk bonds over their life. The method allows us...

We investigate whether the daily betas of individual stocks vary with the release of firm-specific news in an emerging market. Using intraday prices of all stocks traded on the Borsa Istanbul, Turkey over the period 2005-2013, we find evidence that average market betas increase significantly...

The existing replication policies at top finance journals are far weaker than the policies at top economics journals. This paper explores both the costs and benefits of having a stronger replication policy in the context of my failed 2010 initiative to develop a unified policy across all top...

We leverage the new framework for collateralized exposure modelling in Andersen, Pykhtin, and Sokol (2016) to analyze credit risk on positions collateralized with both variation and initial margin. Special attention is paid to the dynamic BCBS-IOSCO uncleared margin rules soon to be mandated for...

The dissertation examines the effect of counterparty risk on the price difference between defaulted US bond prices (market-based recovery) and the corresponding final CDS auction prices (auction-based recovery) during the CDS auction day for the period of 2008-2015. The counterparty risk is...

We present a network model for investigating the impact on systemic risk of central clearing of over the counter (OTC) credit default swaps (CDS). We model contingent cash flows resulting from CDS and other OTC derivatives by a multi-layered network with a core-periphery structure, which is...

Liquidation of large portfolios in practice requires a longer time and smaller relative selling speed than the liquidation of small portfolios. Mean-variance optimal liquidation however results in the same relative selling speed and time horizon for small and large positions. We discuss three...

The maintenance of capital doctrine has generated considerable debate in corporate law since its heyday in the late nineteenth century. Capital rules continue to be debated in jurisdictions as diverse as the China and the United Kingdom. It was long assumed that the doctrine protected a...