Related papers: Stock loans with liquidation
We study the problem of asset liquidation in financial systems. During financial crises, asset liquidation is often inevitable but can lead to substantial losses if a significant amount of illiquid assets are sold simultaneously at…
A corporate bond trader in a typical sell side institution such as a bank provides liquidity to the market participants by buying/selling securities and maintaining an inventory. Upon receiving a request for a buy/sell price quote (RFQ),…
We assess the market risk of the DeFi lending protocols using a multi-asset agent-based model to simulate ensembles of users subject to price-driven liquidation risk. Our multi-asset methodology shows that the protocol's systemic risk is…
A new financial instrument (a new kind of a loan) is introduced. The loan-stock instrument (LSI) combines fixed rate instruments (loans, etc.) with other financial instruments that have higher volatilities and returns (stocks, mutual funds,…
Management of the portfolios containing low liquidity assets is a tedious problem. The buyer proposes the price that can differ greatly from the paper value estimated by the seller, the seller, on the other hand, can not liquidate his…
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 establish general "collapse to the mean" principles that provide conditions under which a law-invariant functional reduces to an expectation. In the convex setting, we retrieve and sharpen known results from the literature. However, our…
We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale…
In this paper, we propose a method that provides a useful technique to compare relationship between risks involved that takes customer become defaulter and debt collection process that might make this defaulter recovered. Through estimation…
We study optimal trading in an Almgren-Chriss model with running and terminal inventory costs and general predictive signals about price changes. As a special case, this allows to treat optimal liquidation in "target zone models": asset…
In this paper, we study the ruin problem with investment in a general framework where the business part X is a L{\'e}vy process and the return on investment R is a semimartingale. We obtain upper bounds on the finite and infinite time ruin…
A new procedure is presented for the objective comparison and evaluation of default definitions. This allows the lender to find a default threshold at which the financial loss of a loan portfolio is minimised, in accordance with Basel II.…
Market liquidity plays a vital role in the field of market micro-structure, because it is the vigor of the financial market. This paper uses a variable called convexity to measure the potential liquidity provided by order-book. Based on the…
We develop a semi-analytic approach to the valuation of auto-callable structures with accrual features subject to barrier conditions. Our approach is based on recent studies of multi-assed binaries, present in the literature. We extend…
In this paper we use a hybrid Monte Carlo-Optimal quantization method to approximate the conditional survival probabilities of a firm, given a structural model for its credit defaul, under partial information. We consider the case when the…
We study optimal liquidation of a trading position (so-called block order or meta-order) in a market with a linear temporary price impact (Kyle, 1985). We endogenize the pressure to liquidate by introducing a downward drift in the…
In this work we study a finite horizon optimal liquidation problem with multiplicative price impact in algorithmic trading, using market orders. We analyze the case when an agent is trading on a market with two financial assets, whose…
Recently, an indicator for stock market fragility and crash size in terms of the Ollivier-Ricci curvature has been proposed. We study analytical and empirical properties of such indicator, test its elasticity with respect to different…
We introduce a theory of stochastic integration with respect to a family of semimartingales depending on a continuous parameter, as a mathematical background to the theory of bond markets. We apply our results to the problem of…
This paper builds a finite-horizon model to study the role of physical collateral in a model of strategic defaults, when the borrower can develop reputation for honesty. Asset ownership increases attractiveness of the reputational channel:…