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Is the Jump-Diffusion Model a Good Solution for Credit Risk Modeling? The Case of Convertible Bonds

Xiao, Tim - Volkswirtschaftliche Fakultät, … - 2013

Tim Xiao: This paper argues that the reduced-form jump diffusion model may not be appropriate for credit risk modeling. To correctly value hybrid defaultable financial instruments, e.g., convertible bonds, we present a new framework that relies on the probability distribution of a default jump...

Persistent link: https://www.econbiz.de/10011109339

Interest Rates After The Credit Crunch: Multiple-Curve Vanilla Derivatives and SABR

Marco, Bianchetti; Mattia, Carlicchi - Volkswirtschaftliche Fakultät, … - 2012

-discounting, in terms of credit and liquidity effects. We also review the new modern pricing approach prevailing among practitioners …, based on multiple yield curves reflecting the different credit and liquidity risk of Libor rates with different tenors and …, and has adopted the modern Multiple-Curve CSA approach, thus incorporating credit and liquidity effects into market prices …

Persistent link: https://www.econbiz.de/10011110035

A Generalization of Gray and Whaley's Option

François-Heude, Alain; Yousfi, Ouidad - Volkswirtschaftliche Fakultät, … - 2013

Options markets display interesting features. Most options are executed when they are near the money. However, the underlying asset price varies significantly during the life-time option. It is therefore difficult to predict the future option position. In order to make options' markets more...

Persistent link: https://www.econbiz.de/10011110392

The Zeeman Effect in Finance: Libor Spectroscopy and Basis Risk Management

Marco, Bianchetti - Volkswirtschaftliche Fakultät, … - 2011

building block of no-arbitrage pricing theory. Nowadays, in the modern financial world after the credit crunch, some Libors are …

Persistent link: https://www.econbiz.de/10011259157

Markets Evolution After the Credit Crunch

Bianchetti, Marco; Carlicchi, Mattia - Volkswirtschaftliche Fakultät, … - 2012

of these effects based on the consideration of credit and liquidity variables. Then, we focus our attention on the …

Persistent link: https://www.econbiz.de/10011260721

On the liquidity of CAC 40 index options Market

François-Heude, Alain; Yousfi, Ouidad - Volkswirtschaftliche Fakultät, … - 2013

enhance liquidity, we test the generalized reset GR option of François-Heude and Yousfi (2013) in the PXA options' market. Our … preliminary results show a significant and positive effect on the liquidity of PXA options in several ways. …

Persistent link: https://www.econbiz.de/10011113793

Collateral Optimization : Liquidity & Funding Value Adjustments, - Best Practices -

Genest, Benoit; Rego, David; Freon, Helene - Volkswirtschaftliche Fakultät, … - 2013

). • Considering Management of Liquidity Issues, banks should carefully consider Collateral Management in case of liquidity issues (e …

Persistent link: https://www.econbiz.de/10011201776

Two Curves, One Price :Pricing & Hedging Interest Rate Derivatives Decoupling Forwarding and Discounting Yield Curves

Bianchetti, Marco - Volkswirtschaftliche Fakultät, … - 2008

We revisit the problem of pricing and hedging plain vanilla single-currency interest rate derivatives using multiple distinct yield curves for market coherent estimation of discount factors and forward rates with dierent underlying rate tenors. Within such double-curve-single-currency framework,...

Persistent link: https://www.econbiz.de/10008457180

The Optimal Liquidity Principle with Restricted Borrowing

Mierzejewski, Fernando - 2009

A model is presented to characterise the (optimal) demand for cash balances in deregulated markets. After the model of James Tobin, 1958, net balances are determined in order to maximise the expected return of a certain portfolio combining risk and capital. Unlike the model of Tobin, the prices...

Persistent link: https://www.econbiz.de/10013159438

An Economic Examination of Collateralization in Different Financial Markets

Xiao, Tim - Volkswirtschaftliche Fakultät, … - 2012

This paper attempts to assess the economic significance and implications of collateralization in different financial markets, which is essentially a matter of theoretical justification and empirical verification. We present a comprehensive theoretical framework that allows for collateralization...

Persistent link: https://www.econbiz.de/10011109791