The Experts below are selected from a list of 174 Experts worldwide ranked by ideXlab platform

Tszkin Chung - One of the best experts on this subject based on the ideXlab platform.

  • using Interest Rate Derivative prices to estimate libor ois spread dynamics and systemic funding liquidity shock probabilities
    2013
    Co-Authors: Chohoi Hui, Tszkin Chung
    Abstract:

    Using Interest Rate Derivative market prices, this paper derives the term structure of the LIBOR-overnight index swap (OIS) spread, which is considered as the funding liquidity risk premium, following the Cox–Ingersoll–Ross model. The probability density functions of the LIBOR-OIS spread constructed from its dynamics were fat-tailed distributions during the crisis of 2008 and the tails further extended after the Lehman failure reflecting deepened uncertainty about the funding liquidity risk. The dynamics provides information to estimate the probability of systemic funding liquidity shocks using a first-passage-time approach. The probability deviated from zero on 18 September 2008 to a material level that provided an early warning signal of the aggregate liquidity shock on 29 September 2008 when the interbank market was totally paralysed.

  • using Interest Rate Derivative prices to estimate libor ois spread dynamics and systemic funding liquidity shock probabilities
    Asia-pacific Financial Markets, 2013
    Co-Authors: Chohoi Hui, Tszkin Chung
    Abstract:

    Following the bankruptcy of Lehman Brothers in mid-September 2008, there were severe disruptions in international money markets and banks reportedly faced severe liquidity shocks in particular US dollar funding shortages, prompting central banks around the world to adopt unprecedented policy measures to supply funds to the banks. A better understanding of the forward-looking information content about funding liquidity risk in Interest Rate Derivative prices is therefore necessary to gauge pressures building surrounding systemic liquidity. Using the market prices of the US dollar LIBOR-overnight index swap spread, we estimate the probability of the systemic funding liquidity shock during the crisis period, which deviated from zero on 17 September 2008 to a significant level. This provided an early warning signal of the systemic liquidity shock on 29 September 2008 when the interbank market was totally paralysed.

  • using Interest Rate Derivative prices to estimate libor ois spread dynamics and systemic funding liquidity shock probabilities
    2010
    Co-Authors: Chohoi Hui, Tszkin Chung
    Abstract:

    Following the bankruptcy of Lehman Brothers in mid-September 2008, there were severe disruptions in international money markets and banks reportedly faced severe liquidity shocks, in particular US-dollar funding shortages, prompting central banks around the world to adopt unprecedented policy measures to supply funds to the banks. The turbulence also spilled over to the money market in Hong Kong. A better understanding of the forward-looking information content about funding liquidity risk in the prices of Interest-Rate Derivative instruments is therefore necessary to gauge pressures on systemic liquidity. Using the market prices of the US-dollar LIBOR-overnight index swap (OIS) spread, we estimate the probability of the systemic funding liquidity shock during the crisis period, which deviated from zero on 18 September 2008 to 12%. This provided an early warning signal of the systemic liquidity shock on 29 September 2008 when the interbank market was paralysed and the Federal Reserve authorised a US$330 billion expansion of swap lines with other central banks.

Chohoi Hui - One of the best experts on this subject based on the ideXlab platform.

  • using Interest Rate Derivative prices to estimate libor ois spread dynamics and systemic funding liquidity shock probabilities
    2013
    Co-Authors: Chohoi Hui, Tszkin Chung
    Abstract:

    Using Interest Rate Derivative market prices, this paper derives the term structure of the LIBOR-overnight index swap (OIS) spread, which is considered as the funding liquidity risk premium, following the Cox–Ingersoll–Ross model. The probability density functions of the LIBOR-OIS spread constructed from its dynamics were fat-tailed distributions during the crisis of 2008 and the tails further extended after the Lehman failure reflecting deepened uncertainty about the funding liquidity risk. The dynamics provides information to estimate the probability of systemic funding liquidity shocks using a first-passage-time approach. The probability deviated from zero on 18 September 2008 to a material level that provided an early warning signal of the aggregate liquidity shock on 29 September 2008 when the interbank market was totally paralysed.

  • using Interest Rate Derivative prices to estimate libor ois spread dynamics and systemic funding liquidity shock probabilities
    Asia-pacific Financial Markets, 2013
    Co-Authors: Chohoi Hui, Tszkin Chung
    Abstract:

    Following the bankruptcy of Lehman Brothers in mid-September 2008, there were severe disruptions in international money markets and banks reportedly faced severe liquidity shocks in particular US dollar funding shortages, prompting central banks around the world to adopt unprecedented policy measures to supply funds to the banks. A better understanding of the forward-looking information content about funding liquidity risk in Interest Rate Derivative prices is therefore necessary to gauge pressures building surrounding systemic liquidity. Using the market prices of the US dollar LIBOR-overnight index swap spread, we estimate the probability of the systemic funding liquidity shock during the crisis period, which deviated from zero on 17 September 2008 to a significant level. This provided an early warning signal of the systemic liquidity shock on 29 September 2008 when the interbank market was totally paralysed.

  • using Interest Rate Derivative prices to estimate libor ois spread dynamics and systemic funding liquidity shock probabilities
    2010
    Co-Authors: Chohoi Hui, Tszkin Chung
    Abstract:

    Following the bankruptcy of Lehman Brothers in mid-September 2008, there were severe disruptions in international money markets and banks reportedly faced severe liquidity shocks, in particular US-dollar funding shortages, prompting central banks around the world to adopt unprecedented policy measures to supply funds to the banks. The turbulence also spilled over to the money market in Hong Kong. A better understanding of the forward-looking information content about funding liquidity risk in the prices of Interest-Rate Derivative instruments is therefore necessary to gauge pressures on systemic liquidity. Using the market prices of the US-dollar LIBOR-overnight index swap (OIS) spread, we estimate the probability of the systemic funding liquidity shock during the crisis period, which deviated from zero on 18 September 2008 to 12%. This provided an early warning signal of the systemic liquidity shock on 29 September 2008 when the interbank market was paralysed and the Federal Reserve authorised a US$330 billion expansion of swap lines with other central banks.

Alexandre F. Roch - One of the best experts on this subject based on the ideXlab platform.

  • Liquidity risk and the term structure of Interest Rates
    Mathematics and Financial Economics, 2015
    Co-Authors: Robert A. Jarrow, Alexandre F. Roch
    Abstract:

    This paper develops an arbitrage-free pricing theory for a term structure of fixed income securities that incorpoRates liquidity risk. In our model, there is a quantity impact on the term structure of zero-coupon bond prices from the trading of any single zero-coupon bond. We derive a set of conditions under which the term structure evolution is arbitrage-free. These no arbitrage conditions constrain both the risk premia and the term structure’s volatility. In addition, we also provide conditions under which the market is complete, and we show that the replication cost of an Interest Rate Derivative is the solution to a backward stochastic differential equation.

Robert A. Jarrow - One of the best experts on this subject based on the ideXlab platform.

  • Liquidity risk and the term structure of Interest Rates
    Mathematics and Financial Economics, 2015
    Co-Authors: Robert A. Jarrow, Alexandre F. Roch
    Abstract:

    This paper develops an arbitrage-free pricing theory for a term structure of fixed income securities that incorpoRates liquidity risk. In our model, there is a quantity impact on the term structure of zero-coupon bond prices from the trading of any single zero-coupon bond. We derive a set of conditions under which the term structure evolution is arbitrage-free. These no arbitrage conditions constrain both the risk premia and the term structure’s volatility. In addition, we also provide conditions under which the market is complete, and we show that the replication cost of an Interest Rate Derivative is the solution to a backward stochastic differential equation.

Yacine Aitsahalia - One of the best experts on this subject based on the ideXlab platform.

  • nonparametric pricing of Interest Rate Derivative securities
    Econometrica, 1996
    Co-Authors: Yacine Aitsahalia
    Abstract:

    The author proposes a nonparametric estimation procedure for continuous-time stochastic models. Because prices of Derivative securities depend crucially on the form of the instantaneous volatility of the underlying process, he leaves the volatility function unrestricted and estimates it nonparametrically. Only discrete data are used but the estimation procedure still does not rely on replacing the continuous-time model by some discrete approximation. Instead, the drift and volatility functions are forced to match the densities of the process. The author estimates the stochastic differential equation followed by the short-term Interest Rate and computes nonparametric prices for bonds and bond options. Copyright 1996 by The Econometric Society.

  • nonparametric pricing of Interest Rate Derivative securities
    National Bureau of Economic Research, 1995
    Co-Authors: Yacine Aitsahalia
    Abstract:

    We propose a nonparametric estimation procedure for continuous- time stochastic models. Because prices of Derivative securities depend crucially on the form of the instantaneous volatility of the underlying process, we leave the volatility function unrestricted and estimate it nonparametrically. Only discrete data are used but the estimation procedure still does not rely on replacing the continuous- time model by some discrete approximation. Instead the drift and volatility functions are forced to match the densities of the process. We estimate the stochastic differential equation followed by the short term Interest Rate and compute nonparametric prices for bonds and bond options.