Rational demand for hedging products, where there is a risk of contractual nonperformance, is fundamentally different to that for indemnity insurance.  In particular, optimal demand is zero for infinitely risk averse individuals, and is nonmonotonic in risk aversion, wealth and price.  For...

In 2018, the International Accounting Standards Board (IASB) introduced International Financial Reporting Standard 9 (IFRS 9), which sets out principles for hedge accounting and replaces International Accounting Standard 39 (IAS 39). IFRS 9 aims to provide better information about companies'...

Chapter 1. Introduction -- Chapter 2. Fixed Income -- Chapter 3. Mathematical Finance -- Chapter 4. Prepayment Model Estimation -- Chapter 5. Stochastic Interest Rate Model -- Chapter 6. Simulation -- Chapter 7. Finite Difference -- Chapter 8. Semi-Analytic MBS Pricing -- Chapter 9....

This paper studies the risk management of central counterparties (CCPs) using a granular transaction-level dataset. We test whether margining practices are sufficient relative to portfolio risk and whether CCPs reduce margin requirements in a ‟race-to-the-bottom." We find that, for some...

The introduction of derivatives on Bitcoin enables investors to hedge risk exposures in cryptocurrencies. Because of volatility swings and jumps in cryptocurrency prices, the traditional variance-based approach to obtain hedge ratios is infeasible. As a consequence, we consider two extensions of...