Related papers: Multi Currency Credit Default Swaps Quanto effects…
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…
We revisit the problem of pricing and hedging plain vanilla single-currency interest rate derivatives using multiple distinct yield curves for market coherent estimation of discount factors and forward rates with different underlying rate…
The purpose of this paper is introducing rigorous methods and formulas for bilateral counterparty risk credit valuation adjustments (CVA's) on interest-rate portfolios. In doing so, we summarize the general arbitrage-free valuation…
This paper discusses the valuation of credit default swaps, where default is announced when the reference asset price has gone below certain level from the last record maximum, also known as the high-water mark or drawdown. We assume that…
We analyze the counterparty risk embedded in CDS contracts, in presence of a bilateral margin agreement. First, we investigate the pricing of collateralized counterparty risk and we derive the bilateral Credit Valuation Adjustment (CVA),…
We consider a model of debt management, where a sovereign state trade some bonds to service the debt with a pool of risk-neutral competitive foreign investors. At each time, the government decides which fraction of the gross domestic…
In this paper, a geometric function is introduced to reflect the attenuation speed of impact of one firm's default to its partner. If two firms are competitions (copartners), the default intensity of one firm will decrease (increase)…
The classical reduced-form and filtration expansion framework in credit risk is extended to the case of multiple, non-ordered defaults, assuming that conditional densities of the default times exist. Intensities and pricing formulas are…
Contagion is an extremely important topic in finance. Contagion is at the core of most major financial crises, in particular the 2008 financial crisis. Although various approaches to quantifying contagion have been proposed, many of them…
In this note we show how to replicate a stylized CDS with a repurchase agreement and an asset swap. The latter must be designed in such a way that, on default of the issuer, it is terminated with a zero close-out amount. This break clause…
This paper considers mutual obligations in the interconnected bank system and analyzes their influence on joint and marginal survival probabilities as well as CDS and FTD prices for the individual banks. To make the role of mutual…
Specialized topics on financial data analysis from a numerical and physical point of view are discussed. They pertain to the analysis of crash prediction in stock market indices and to the persistence or not of coherent and random sequences…
During the last two years, Europe has been facing a debt crisis, and Greece has been at its center. In response to the crisis, drastic actions have been taken, including the halving of Greek debt. Policy makers acted because interest rates…
There are many studies on development of models for analyzing some derivatives such as credit default swaps .
This paper presents a convenient framework for modeling default process and pricing derivative securities involving credit risk. The framework provides an integrated view of credit valuation adjustment by linking distance-to-default,…
Recently, incomplete-market techniques have been used to develop a model applicable to credit default swaps (CDSs) with results obtained that are quite different from those obtained using the market-standard model. This article makes use of…
In this note we investigate the consistency under inversion of jump diffusion processes in the Foreign Exchange (FX) market. In other terms, if the EUR/USD FX rate follows a given type of dynamics, under which conditions will USD/EUR follow…
We propose two structural models for stochastic losses given default which allow to model the credit losses of a portfolio of defaultable financial instruments. The credit losses are integrated into a structural model of default events…
As impressively shown by the financial crisis in 2007/08, contagion effects in financial networks harbor a great threat for the stability of the entire system. Without sufficient capital requirements for banks and other financial…
We have presented a novel technique of detecting intermittencies in a financial time series of the foreign exchange rate data of U.S.- Euro dollar(US/EUR) using a combination of both statistical and spectral techniques. This has been…