This article investigates the European repo market and its role as an amplification channel for sovereign-debt crises. We focus on the centrally cleared segment, representing the majority of European repos. A novel data set on repo and margin haircuts applied to sovereign bonds by central...

Up to the 2007 crisis, research within bottom‐up CDO models mainly concentrated on the dependence between defaults. However, due to the substantial increase in the market price of systemic credit risk protection, more attention has been paid to recovery rate assumptions.In this paper, we focus...

We consider some pricing and risk management issues related to defaultable bonds, in the context of sovereign debt default and restructuring. Standard recovery schemes such as fractional recovery of market value, of Treasury and of face value are investigated: we discuss their consistency with...

This paper deals with risk mitigation of interest rate margins related to a bank's demand deposits. We assume the demand deposit evolution to be related to both interest rates and some exogenous factor which can be interpreted as business risk or model risk. We subsequently discuss the tradeoff...

This paper is dedicated to the risk analysis of credit portfolios. Assuming that default indicators form an exchangeable sequence of Bernoulli random variables and as a consequence of de Finetti's theorem, default indicators are Binomial mixtures. We can characterize the supermodular order...

We consider the mean-variance hedging problem when asset prices follow Ito processes in an incomplete market framework. The hedging numeraire and the variance-optimal martingale measure appear to be a key tool for characterizing the optimal hedging strategy (see Gourieroux et al. 1996; Rheinlander...

Regulatory capital requirements for market risk, also known as the Fundamental Review of the Trading Book (FRTB), were disclosed by the Basel Committee on January 2016. This major overhaul of the Basel 2.5 framework challenges risk model specification and backtesting. Given the prevalence of...