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Tail dependence of financial stocks and CDS markets : evidence using copula methods and simulation-based inference

Silva, Paulo Pereira da; Rebelo, Paulo Tomaz; Afonso, … - 2014

Using copula methods and simulation-based inference, the authors investigate the association between the performance of a stock index formed by European financial institutions and a basket of CDS contracts of the same sector. Their analysis focuses on (i) assessing the dependence structure of...

Persistent link: https://www.econbiz.de/10010429997

Tail dependence of financial stocks and CDS markets : evidence using copula methods and simulation-based inference

Silva, Paulo Pereira da; Rebelo, Paulo Tomaz; Afonso, … - 2013

Using copula methods and simulation-based inference the authors address the association between the performance of the stocks of European banks and the CDS markets. Their analysis has three purposes: (i) analysing the dependence structure of the markets when extreme events occur; (ii) checking...

Persistent link: https://www.econbiz.de/10010187546

Hedging interest rate risk using a structural model of credit risk

Huang, Jing-Zhi; Shi, Zhan - 2016

This paper investigates predictions of structural credit risk models for interest rate sensitivities of corporate bond returns. Recent evidence has shown that the existing models fail to capture this sensitivity (a stylized fact referred to as the interest rate sensitivity puzzle). We propose...

Persistent link: https://www.econbiz.de/10011810957

Causality between arbitrage and liquidity in platinum futures

Iwatsubo, Kentaro; Watkins, Clinton - In: Journal of risk and financial management : JRFM 15 (2022) 12, pp. 1-17

Arbitrage and liquidity are interrelated. Liquidity facilitates arbitrageurs’ trading on deviations from the law of one … price. However, whether arbitrage opportunity leads to an increase or decrease in liquidity depends on the cause of the … deviation. A demand shock leads to greater liquidity, while asymmetric information is toxic to liquidity. We examine how …

Persistent link: https://www.econbiz.de/10014284282

Credit risk transfer and bank competition

Hakenes, Hendrik; Schnabel, Isabel - 2009

We present a banking model with imperfect competition in which borrowers’ access to credit is improved when banks are able to transfer credit risks. However, the market for credit risk transfer (CRT) works smoothly only if the quality of loans is public information. If the quality of loans is...

Persistent link: https://www.econbiz.de/10003883661

CDO and HAC

Choroś, Barbara; Härdle, Wolfgang; Okhrin, Ostap - 2009

Modelling portfolio credit risk is one of the crucial challenges faced by financial services industry in the last few years. We propose the valuation model of collateralized debt obligations (CDO) based on copula functions with up to three parameters, with default intensities estimated from...

Persistent link: https://www.econbiz.de/10003871765

The term structure of risk premia : new evidence from the financial crisis

Berg, Tobias - 2010

This study calibrates the term structure of risk premia before and during the 2007/2008 financial crisis using a new calibration approach based on credit default swaps. The risk premium term structure was flat before the crisis and downward sloping during the crisis. The instantaneous risk...

Persistent link: https://www.econbiz.de/10003971282

Background filtrations and canonical loss processes for top-down models of portfolio credit risk

Ehlers, Philippe (contributor); … - 2007

In single-obligor default risk modelling, using a background filtration in conjunction with a suitable embedding hypothesis (generally known as H-hypothesis or immersion property) has proven a very successful tool to separate the actual default event from the model for the default arrival...

Persistent link: https://www.econbiz.de/10003549840

Default compensator, incomplete information, and the term structure of credit spreads

Giesecke, Kay - 2001

We provide a framework for the analysis of term structures of credit spreads on corporate bonds in the presence of informational asymmetries. While bond investors observe default incidents, we suppose that they have incomplete information on the firm's assets and/or the threshold asset level at...

Persistent link: https://www.econbiz.de/10009620780

Compensator-based simulation of correlated defaults

Giesecke, Kay - 2002

The market for derivatives with payoffs contingent on the credit quality of a number of reference entities has grown considerably over recent years. The risk analysis and valuation of such multi-name structures often relies on simulating the performance of the underlying credits. In this paper...

Persistent link: https://www.econbiz.de/10009624843