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Limits to arbitrage and hedging: Evidence from commodity markets

Acharya, Viral V.; Lochstoer, Lars A.; Ramadorai, Tarun - In: Journal of Financial Economics 109 (2013) 2, pp. 441-465

producers have hedging demands for commodity futures. Increases in producers' hedging demand or speculators' capital constraints … increase hedging costs via price-pressure on futures. These in turn affect producers' equilibrium hedging and supply decision … 2010. The component of the commodity futures risk premium associated with producer hedging demand rises when speculative …

Persistent link: https://www.econbiz.de/10010678703

Limits to Arbitrage and Hedging: Evidence from Commodity Markets

Acharya, Viral V.; Ramadorai, Tarun; Lochstoer, Lars A. - National Bureau of Economic Research (NBER) - 2011

speculators are capital constrained, and commodity producers have hedging demands for commodity futures. Increases (decreases) in … producers' hedging demand (speculators' risk-capacity) increase hedging costs via price-pressure on futures, reduce producers … associated with producer hedging demand rises when speculative activity reduces. We conclude that limits to financial arbitrage …

Persistent link: https://www.econbiz.de/10008869242

A Transparency Standard for Derivatives

Acharya, Viral V. - National Bureau of Economic Research (NBER) - 2011

Derivatives exposures across large financial institutions often contribute to - if not necessarily create - systemic risk. Current reporting standards for derivatives exposures are nevertheless inadequate for assessing these systemic risk contributions. In this paper, I explain how a...

Persistent link: https://www.econbiz.de/10009359905

Liquidity Risk of Corporate Bond Returns: A Conditional Approach

Acharya, Viral V.; Amihud, Yakov; Bharath, Sreedhar T. - National Bureau of Economic Research (NBER) - 2010

We study the exposure of the US corporate bond returns to liquidity shocks of stocks and Treasury bonds over the period 1973 - 2007 in a regime - switching model. In one regime, liquidity shocks have mostly insignificant effects on bond prices, whereas in another regime, a rise in illiquidity...

Persistent link: https://www.econbiz.de/10008680937

Liquidity risk of corporate bond returns: conditional approach

Acharya, Viral V.; Amihud, Yakov; Bharath, Sreedhar T. - In: Journal of Financial Economics 110 (2013) 2, pp. 358-386

We study the exposure of the US corporate bond returns to liquidity shocks of stocks and Treasury bonds over the period 1973–2007 in a regime-switching model. In one regime, liquidity shocks have mostly insignificant effects on bond prices, whereas in another regime, a rise in illiquidity...

Persistent link: https://www.econbiz.de/10011039286

When does strategic debt service matter?

Acharya, Viral V.; Huang, Jing-zhi; Subrahmanyam, Marti G. - 2002

Recent work has suggested that strategic underperformance of debt-service obligations by equity holders can resolve the gap between observed yield spreads and those generated by Merton (1974)-style models.(...)

Persistent link: https://www.econbiz.de/10005846831

Pricing Credit Derivatives with Rating Transitions

Acharya, Viral V. - 2009

We present a model for pricing risky debt and valuing credit derivatives that is easily calibrated to existing variables. Our approach expands a classical term-structure modal to allow for multiple rating classes of debt. The framework has two salient features: (1) it uses a rating-transition...

Persistent link: https://www.econbiz.de/10012767869

Insider Trading in Credit Derivatives

Acharya, Viral V. - 2006

Insider trading in the credit derivatives market has become a significant concern for regulators and participants. This paper attempts to quantify the problem. Using news reflected in the stock market as a benchmark for public information, we report evidence of significant incremental...

Persistent link: https://www.econbiz.de/10012735179

Corporate Bond Valuation and Hedging with Stochastic Interest Rates and Endogenous Bankruptcy

Carpenter, Jennifer N. - 2002

stochastic. It then uses the results to explain the dynamics of hedging. Bankruptcy rules are important determinants of corporate … produce the same prices, they can have very different hedging implications. We show that empirical results on the relation …

Persistent link: https://www.econbiz.de/10012741808

Costly Financing, Optimal Payout Policies and the Valuation of Corporate Debt

Acharya, Viral V. - 2000

We present a cash-flow based model of corporate debt valuation that incorporates two novel features. First, we allow for the separation and optimal determination of the firm's debt-service and dividend policies; in particular, the firm is allowed to maintain cash reserves to meet future debt...

Persistent link: https://www.econbiz.de/10012743488