Showing 1 - 10 of 33
We propose a simulation-free framework for stress testing the resilience of a financial network to external shocks affecting balance sheets. Whereas previous studies of contagion effects in financial networks have relied on large scale simulations, our approach uses a simple analytical criterion...
Persistent link: https://www.econbiz.de/10009651594
Propagation of balance-sheet or cash-flow insolvency across financial institutions may be modeled as a cascade process on a network representing their mutual exposures. We derive rigorous asymptotic results for the magnitude of contagion in a large financial network and give an analytical...
Persistent link: https://www.econbiz.de/10009403411
<Para ID="Par1">This paper explores, in a multiperiod setting, the funding liquidity of a borrower that finances its operations through short-term debt. The short-term debt is provided by a continuum of creditors with heterogeneous beliefs about the prospects of the borrower. In each period, creditors observe...</para>
Persistent link: https://www.econbiz.de/10011241201
We propose a stable non-parametric algorithm for the calibration of pricing models for portfolio credit derivatives: given a set of observations of market spreads for CDO tranches, we construct a risk-neutral default intensity process for the portfolio underlying the CDO which matches these...
Persistent link: https://www.econbiz.de/10010631315
We provide the definition and a complete characterization of regular affine processes. This type of process unifies the concepts of continuousstate branching processes with immigration and Ornstein-Uhlenbeck type processes. We show, and provide foundations for, a wide range of financial...
Persistent link: https://www.econbiz.de/10005725251
Persistent link: https://www.econbiz.de/10005477845
In this paper we examine whether the Swiss Solvency Test risk measure is a coherent measure of risk as introduced in Artzner et al. [Artzner, P., Delbaen, F., Eber, J.M., Heath, D., 1999. Coherent measures of risk. Math. Finance 9, 203-228; Artzner, P., Delbaen, F., Eber, J.M., Heath, D., Ku,...
Persistent link: https://www.econbiz.de/10005374820
In this paper, the treasury rates and the credit migrations are jointly modeled by multi-dimensional affine processes. In order to capture the entire information, including credit migrations and default events, we construct non-conservative regular affine processes to model credit migrations and...
Persistent link: https://www.econbiz.de/10005413230
We develop a general and efficient method for valuating credit derivatives based on multiple entities in an affine framework. This includes interdependence of market and credit risk, joint credit migration and counterparty default risk of multiple firms. As an application we provide closed form...
Persistent link: https://www.econbiz.de/10005413236
The existence of the growth optimal portfolio (GOP), also known as Kelly portfolio, is vital for a financial market to be meaningful. The GOP, if it exists, is uniquely determined by the market parameters of the primary security accounts. However, markets may develop and new security accounts...
Persistent link: https://www.econbiz.de/10004984527