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Completing CVA and Liquidity : Firm-Level Positions and Collateralized Trades

Kenyon, Chris - 2010

, i.e. increased risk of default, in practice. The unified picture of CVA and liquidity introduced by Morini & Prampolini … liquidity. For a particular large complex financial institution that profited $2.5B from spread widening we show that including …

Persistent link: https://www.econbiz.de/10013138140

A Defaultable Binomial Tree

Kolman, Marek - 2013

In the study we present a fairly generalized two-level option tree that is capable of pricing credit-linked vanilla plain European/American and path-dependent options. The main contribution is thus an extension of a classical binomial tree methodology to a framework within which the underlying...

Persistent link: https://www.econbiz.de/10013072711

Pricing Corporate Defaultable Bond Using Declared Firm Value

O., Hyong-Chol - 2013

We study the pricing problem for corporate defaultable bond from the viewpoint of the investors outside the firm that could not exactly know about the information of the firm. We consider the problem for pricing of corporate defaultable bond in the case when the firm value is only declared in...

Persistent link: https://www.econbiz.de/10013074937

Market Risk and Liquidity of the Risky Bonds

Gikhman, Ilya I. - 2013

In this paper, we present effect of the liquidity on risky bonds pricing. The liquidity effect is represented by the … adjustment to the single price format. We begin with bid-ask pricing format and it helps to observe effect of the liquidity on …

Persistent link: https://www.econbiz.de/10013076522

Implied Liquidity Risk Premium in the Term Structure of Sovereign Credit Default Swap and Bond Spreads

Badaoui, Saad - 2014

In this study, we focus on the dynamic properties of the risk-neutral liquidity risk premium specific to the sovereign … credit default swap (CDS) and bond markets. We show that liquidity risk has a non-trivial role and participates directly to …. Secondly, our results indicate that the time-varying bond and CDS liquidity risk premium move in opposite directions which …

Persistent link: https://www.econbiz.de/10013063132

The Impact of Liquidity on Senior Credit Spreads During the Subprime Crisis

Marra, Miriam - 2013

This paper examines the effects of liquidity during the 2007-09 crisis, focussing on the senior tranche of the CDX …-capital, and liquidity preference exhibited by investors. Using cointegration analysis, the paper shows that during the crisis … lower market and funding liquidity and higher investors' risk-aversion are important drivers of the increase in the spread …

Persistent link: https://www.econbiz.de/10013084230

The Impact of Central Clearing on Counterparty Risk, Liquidity, and Trading : Evidence from the Credit Default Swap Market

Loon, Yee Cheng - 2013

improvement in liquidity and trading activity …

Persistent link: https://www.econbiz.de/10013089648

An Empirical Investigation of CDS Spreads Using a Regime Switching Default Risk Model

Milidonis, Andreas - 2015

Default risk in equity returns can be measured by structural models of default. In this paper we propose a credit warning signal (CWS) based on the Merton default risk (MDR) model and a Regime-switching default risk (RSDR) model. The RSDR model is a generalization of the MDR model, comprises...

Persistent link: https://www.econbiz.de/10013021368

Stochastic Volatility of Financial Assets and Default Risk

Katz, Yuri A. - 2014

We present the non-Gaussian extension of the traditional Merton framework, which takes into account slowly relaxing fluctuations of the volatility of the firm's market value of financial assets. The minimal version of the model depends on the Tsallis entropic parameter q and the generalized...

Persistent link: https://www.econbiz.de/10013048256

Default Risk and Option Returns

Vasquez, Aurelio - 2020

This paper studies the effects of default risk on equity option returns. We show that there is a cross-sectional and a time-series relation between default risk and option returns. In the cross-section, expected delta-hedged equity option returns have a negative relation with default risk...

Persistent link: https://www.econbiz.de/10012855973