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Björn Rock - One of the best experts on this subject based on the ideXlab platform.

Chu Zhang - One of the best experts on this subject based on the ideXlab platform.

  • Counterparty Credit Risk and derivatives pricing
    Journal of Financial Economics, 2019
    Co-Authors: Chu Zhang
    Abstract:

    Abstract We derive a model with qualitative implications for options pricing under counterparty Credit Risk and provide empirical evidence using the data from the Hong Kong derivatives market during 2005–2014. We find that the log-price difference between a derivative warrant with counterparty Credit Risk and an otherwise identical option without counterparty Credit Risk is significantly and negatively associated with the Credit default swap spread on the warrant issuer. We also find that the prices of out-of-the-money put warrants are more sensitive to Credit Risk than those of other warrants. Our results show counterparty Credit Risk matters for derivative pricing.

Christina E. Bannier - One of the best experts on this subject based on the ideXlab platform.

Martin Summer - One of the best experts on this subject based on the ideXlab platform.

  • Credit Risk in General Equilibrium
    Social Science Research Network, 2012
    Co-Authors: Jürgen Eichberger, Klaus Rheinberger, Martin Summer
    Abstract:

    Credit Risk models used in quantitative Risk management treat Credit Risk analysis conceptually like a single person decision problem. From this perspective an exogenous source of Risk drives the fundamental parameters of Credit Risk: probability of default, exposure at default and the recovery rate. In reality these parameters are the result of the interaction of many market participants: They are endogenous. We develop a general equilibrium model with endogenous Credit Risk that can be viewed as an extension of the capital asset pricing model. We analyze equilibrium prices of securities as well as equilibrium allocations in the presence of Credit Risk. We use the model to discuss the conceptual underpinnings of the approach to Risk weight calibration for Credit Risk taken by the Basel Committee.

  • Credit Risk in general equilibrium
    Research Papers in Economics, 2011
    Co-Authors: Jürgen Eichberger, Klaus Rheinberger, Martin Summer
    Abstract:

    Credit Risk models used in quantitative Risk management treat Credit Risk analysis conceptually like a single person decision problem. From this perspective an exogenous source of Risk drives the fundamental parameters of Credit Risk: probability of default, exposure at default and the recovery rate. In reality these parameters are the result of the interaction of many market participants: They are endogenous. We develop a general equilibrium model with endogenous Credit Risk that can be viewed as an extension of the capital asset pricing model. We analyze equilibrium prices of securities as well as equilibrium allocations in the presence of Credit Risk. We use the model to discuss the conceptual underpinnings of the approach to Risk weight calibration for Credit Risk taken by the Basel Committee. JEL Classification: G32, G33, G01, D52

Yannik Bofinger - One of the best experts on this subject based on the ideXlab platform.