Related papers: Markets Evolution After the Credit Crunch
Before the 2008 financial crisis, most research in financial mathematics focused on pricing options without considering the effects of counterparties' defaults, illiquidity problems, and the role of the sale and repurchase agreement (Repo)…
The interbank market is considered one of the most important channels of contagion. Its network representation, where banks and claims/obligations are represented by nodes and links (respectively), has received a lot of attention in the…
This paper investigates cross-border lending behavior from the Group of Seven (G7) during the 2001-2013 period. We employ gravity model to consider how bilateral factors, global factors, and other determinants of pull factors affect cross…
This study investigates the functioning of modern payment systems through the lens of banks' maturity mismatch practices, and it examines the effects of banks' refusal to roll over short-term interbank liabilities on financial stability.…
The global financial crisis in 2007-2009 demonstrated that systemic risk can spread all over the world through a complex web of financial linkages, yet we still lack fundamental knowledge about the evolution of the financial web. In…
In this empirical paper we show that in the months following a crash there is a distinct connection between the fall of stock prices and the increase in the range of interest rates for a sample of bonds. This variable, which is often…
We present a detailed analysis of interest rate derivatives valuation under credit risk and collateral modeling. We show how the credit and collateral extended valuation framework in Pallavicini et al (2011), and the related collateralized…
Price-mediated contagion occurs when a positive feedback loop develops following a drop in asset prices which forces banks and other financial institutions to sell their holdings. Prior studies of such events fix the level of market…
The introduction of CCPs in most derivative transactions will dramatically change the landscape of derivatives pricing, hedging and risk management, and, according to the TABB group, will lead to an overall liquidity impact about 2 USD…
In the aftermath of the Great Recession, the regulatory framework for credit union operations has become a subject of controversy. Competing financial enterprises such as thrifts and other banks have argued that credit unions have received…
Financial contagion from liquidity shocks has being recently ascribed as a prominent driver of systemic risk in interbank lending markets. Building on standard compartment models used in epidemics, in this work we develop an EDB…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
Credit Value Adjustment (CVA) is the difference between the value of the default-free and credit-risky derivative portfolio, which can be regarded as the cost of the credit hedge. Default probabilities are therefore needed, as input…
The financial industry has undergone a significant transition from the London Interbank Offered Rates (LIBORs) to Risk Free Rates (RFRs) such as, e.g., the Secured Overnight Financing Rate (SOFR) in the U.S. and the Cash Rate (AONIA) in…
Private credit assets under management grew from \$158 billion in 2010 to nearly \$2 trillion globally by mid-2024, fundamentally reshaping corporate credit markets. This paper provides a systematic survey of the academic literature on…
This article presents a generic model for pricing financial derivatives subject to counterparty credit risk. Both unilateral and bilateral types of credit risks are considered. Our study shows that credit risk should be modeled as American…
The paper reviews origins of the approach to pricing derivatives post-crisis by following three papers that have received wide acceptance from practitioners as the theoretical foundations for it - [Piterbarg 2010], [Burgard and Kjaer 2010]…
Companies do not operate in a vacuum. As companies move towards an increasingly specialized production function and their reach is becoming truly global, their aptitude in managing and shaping their inter-organizational network is a…
This paper presents a new model for pricing financial derivatives subject to collateralization. It allows for collateral arrangements adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized…
We study the cluster dynamics of multichannel (multivariate) time series by representing their correlations as time-dependent networks and investigating the evolution of network communities. We employ a node-centric approach that allows us…