Related papers: Active margin system for margin loans using cash a…
An active margin system for margin loans is proposed for Chinese margin lending market, which uses cash and randomly selected stock as collateral. The conditional probability of negative return(CPNR) after a forced sale of securities from…
In order to protect brokers from customer defaults in a volatile market, an active margin system is proposed for the transactions of margin lending in China. The probability of negative return under the condition that collaterals are…
This paper works out fair values of stock loan model with automatic termination clause, cap and margin. This stock loan is treated as a generalized perpetual American option with possibly negative interest rate and some constraints. Since…
Margin trading in which investors purchase shares with money borrowed from brokers is blamed to be a major cause of the 2015 Chinese stock market crash. We propose a cascading failure model and examine how an increase in margin trading…
A stock loan is a contract whereby a stockholder uses shares as collateral to borrow money from a bank or financial institution. In Xia and Zhou (2007), this contract is modeled as a perpetual American option with a time varying strike and…
This paper supplies two possible resolutions of Fortune's (2000) margin-loan pricing puzzle. Fortune (2000) noted that the margin loan interest rates charged by stock brokers are very high in relation to the actual (low) credit risk and the…
In this paper, which is the third installment of the author's trilogy on margin loan pricing, we analyze $1,367$ monthly observations of the U.S. broker call money rate, which is the interest rate at which stock brokers can borrow to fund…
This work extends a previous work in regime detection, which allowed trading positions to be profitably adjusted when a new regime was detected, to ex ante prediction of regimes, leading to substantial performance improvements over the…
A new class of risk measures called cash sub-additive risk measures is introduced to assess the risk of future financial, nonfinancial and insurance positions. The debated cash additive axiom is relaxed into the cash sub additive axiom to…
Short sales are regarded as negative purchases in textbook asset pricing theory. In reality, however, the symmetry between purchases and short sales is broken by a variety of costs and risks peculiar to the latter. We formulate an optimal…
The limit order book mechanism has been the core trading mechanism of the modern financial market. In the cryptocurrency market, centralized exchanges also adopt this limit order book mechanism and a centralized matching engine dynamically…
This paper uses the panel data of Chinese listed companies from 2007 to 2019, uses the relaxation of China's margin trading and short selling restrictions as the basis of quasi experimental research, and then constructs a double difference…
Systemic risk refers to the risk that the financial system is susceptible to failures due to the characteristics of the system itself. The tremendous cost of systemic risk requires the design and implementation of tools for the efficient…
The use of CVA to cover credit risk is widely spread, but has its limitations. Namely, dealers face the problem of the illiquidity of instruments used for hedging it, hence forced to warehouse credit risk. As a result, dealers tend to offer…
The global financial system has become highly connected and complex. Has been proven in practice that existing models, measures and reports of financial risk fail to capture some important systemic dimensions. Only lately, advisory boards…
A novel procedure is presented for the objective comparison and evaluation of a bank's decision rules in optimising the timing of loan recovery. This procedure is based on finding a delinquency threshold at which the financial loss of a…
I unravel the basic long run dynamics of the broker call money market, which is the pile of cash that funds margin loans to retail clients (read: continuous time Kelly gamblers). Call money is assumed to supply itself perfectly…
This paper examines the pricing issue of margin-call stock loans with finite maturities under the Black-Scholes-Merton framework. In particular, using a Fourier Sine transform method, we reduce the partial differential equation governing…
Systemic risk measures were introduced to capture the global risk and the corresponding contagion effects that is generated by an interconnected system of financial institutions. To this purpose, two approaches were suggested. In the first…
Management of systemic risk in financial markets is traditionally associated with setting (higher) capital requirements for market participants. There are indications that while equity ratios have been increased massively since the…