Related papers: Stock loans with liquidation
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 examines the dividend and investment policies of a cash constrained firm that has access to costly external funding. We depart from the literature by allowing the firm to issue collateralized debt to increase its investment in…
We assume a continuous-time price impact model similar to Almgren-Chriss but with the added assumption that the price impact parameters are stochastic processes modeled as correlated scalar Markov diffusions. In this setting, we develop…
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…
I develop a tractable adverse-selection model comparing secured bank loans and bonds when both pledge collateral but differ in effective liquidation efficiency. A small wedge in recovery rates generates coexistence, a sharp bank-bond…
A stock loan is a loan, secured by a stock, which gives the borrower the right to redeem the stock at any time before or on the loan maturity. The way of dividends distribution has a significant effect on the pricing of the stock loan and…
Margin system for margin loans using cash and stock as collateral is considered in this paper, which is the line of defence for brokers against risk associated with margin trading. The conditional probability of negative return is used as…
The recent "correlation breakdown" in the modeling of credit default swaps, in which model correlations had to exceed 100% in order to reproduce market prices of supersenior tranches, is analyzed and argued to be a fundamental market…
We build an optimal portfolio liquidation model for OTC markets, aiming at minimizing the trading costs via the choice of the liquidation time. We work in the Locally Linear Order Book framework of \cite{toth2011anomalous} to obtain the…
This paper studies the ubiquitous problem of liquidating large quantities of highly correlated stocks, a task frequently encountered by institutional investors and proprietary trading firms. Traditional methods in this setting suffer from…
We propose a framework to study the optimal liquidation strategy in a limit order book for large-tick stocks, with spread equal to one tick. All order book events (market orders, limit orders and cancellations) occur according to…
Liquidation is the process of selling a large number of shares of one stock sequentially within a given time frame, taking into consideration the costs arising from market impact and a trader's risk aversion. The main challenge in…
In this article, we consider the problem of a bank's loan portfolio in the context of liquidity risk, while allowing for the limited liability protection enjoyed by the bank. Accordingly, we construct a novel loan portfolio model with…
We study an optimal liquidation problem under the ambiguity with respect to price impact parameters. Our main results show that the value function and the optimal trading strategy can be characterized by the solution to a semi-linear PDE…
Credit Scores are ubiquitous and instrumental for loan providers and regulators. In this paper we showcase how micro-loan credit system can be developed in real setting. We show what challenges arise and discuss solutions. Particularly, we…
We propose tests for the convexity/linearity/concavity of a transformation of the dependent variable in a semiparametric transformation model. These tests can be used to verify monotonicity of the treatment effect, or, equivalently,…
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…
Changes in collateralization have been implicated in significant default (or near-default) events during the financial crisis, most notably with AIG. We have developed a framework for quantifying this effect based on moving between…
The aim of this work is to propose an end-by-end modeling framework to evaluate the risk measures of a bank's portfolio of collateralized loans in an economy subject to the climate transition. The economy, organized in sectors, is driven by…
We introduce a straightforward method to analyze the blow-up of systems of ordinary differential inequalities, and apply it to study the blow- up of solutions to a weakly coupled system of semilinear heat equations. We prove that the…