arXiv · arXiv q-fin · 2020
Crises challenge client XVA management when continuous collateralization is not possible because a derivative locks in the client credit level and the provider's funding level, on the trade date, for the life of the trade. We price XVA reduction strategies from the client point of view comparing multiple trade strategies using Mandatory Breaks or Restructuring, to modifications of a single trade using a Reset. We ana…
Chris Kenyon
arXiv · arXiv q-fin · 2016
We report on the occurrence of an anomaly in the price impacts of small transaction volumes following a change in the fee structure of an electronic market. We first review evidence for the existence of a master curve for price impact on the Johannesburg Stock Exchange (JSE). On attempting to re-estimate a master curve after fee reductions, it is found that the price impact corresponding to smaller volume trades is g…
Michael Harvey, Dieter Hendricks, Tim Gebbie, Diane Wilcox
arXiv · arXiv q-fin · 2013
We show how to restructure the counterparty risk faced by the originator of a securitization or covered bond arising from an interest rate hedging swap assisted by a "one-way" collateral agreement. This risk emerges when the swap is negotiated between the special purpose vehicle and a third party that covers itself through a back-to-back swap with the originator. We show that the counterparty risk of the originator m…
Lorenzo Giada, Claudio Nordio
arXiv · arXiv q-fin · 2011
We introduce an innovative theoretical framework to model derivative transactions between defaultable entities based on the principle of arbitrage freedom. Our framework extends the traditional formulations based on Credit and Debit Valuation Adjustments (CVA and DVA). Depending on how the default contingency is accounted for, we list a total of ten different structuring styles. These include bipartite structures bet…
Claudio Albanese, Damiano Brigo, Frank Oertel
arXiv · arXiv q-fin · 2011
We present a dialogue on Counterparty Credit Risk touching on Credit Value at Risk (Credit VaR), Potential Future Exposure (PFE), Expected Exposure (EE), Expected Positive Exposure (EPE), Credit Valuation Adjustment (CVA), Debit Valuation Adjustment (DVA), DVA Hedging, Closeout conventions, Netting clauses, Collateral modeling, Gap Risk, Re-hypothecation, Wrong Way Risk, Basel III, inclusion of Funding costs, First t…
Damiano Brigo
arXiv · arXiv q-fin · 2024
The steel industry is a major contributor to CO2 emissions, accounting for 7% of global emissions. The European steel industry is seeking to reduce its emissions by increasing the use of electric arc furnaces (EAFs), which can produce steel from scrap, marking a major shift towards a circular steel economy. Here, we show by combining trade with business intelligence data that this shift requires a deep restructuring …
Peter Klimek, Maximilian Hess, Markus Gerschberger, Stefan Thurner
arXiv · arXiv q-fin · 2023
This paper presents a multi-label topic model for financial texts like ad-hoc announcements, 8-K filings, finance related news or annual reports. I train the model on a new financial multi-label database consisting of 3,044 German ad-hoc announcements that are labeled manually using 20 predefined, economically motivated topics. The best model achieves a macro F1 score of more than 85%. Translating the data results in…
Moritz Scherrmann
arXiv · arXiv q-fin · 2014
This work presents the results of an empirical research with the target of modeling the stylized facts of the daily expost System Marginal Price (SMP) of the Greek wholesale electricity market, using data from January 2004 to December of 2011. SMP is considered here as the footprint of an underline stochastic and nonlinear process that bears all the information reflecting not only the effects of changes in endogenous…
G. Papaioannou, P. Papaioannou, N. Parliaris
arXiv · arXiv q-fin · 2014
Financial markets are exposed to systemic risk (SR), the risk that a major fraction of the system ceases to function, and collapses. It has recently become possible to quantify SR in terms of underlying financial networks where nodes represent financial institutions, and links capture the size and maturity of assets (loans), liabilities, and other obligations, such as derivatives. We demonstrate that it is possible t…
Sebastian Poledna, Stefan Thurner
arXiv · arXiv q-fin · 2009
We propose a simple quantitative model of Schumpeterian economic dynamics. New goods and services are endogenously produced through combinations of existing goods. As soon as new goods enter the market they may compete against already existing goods, in other words new products can have destructive effects on existing goods. As a result of this competition mechanism existing goods may be driven out from the market - …
Stefan Thurner, Peter Klimek, Rudolf Hanel
arXiv · arXiv · 2026
Bankruptcy is a low-frequency but high-impact corporate event, making early risk identification important for creditors, investors, regulators, and risk managers. Traditional bankruptcy-prediction models rely primarily on accounting ratios, but these measures may reflect financial deterioration only after it appears in reported financial statements. Narrative disclosures in annual 10-K filings may therefore provide i…
Zhen Zhang, Moxuan Zheng, Tongchen Zhang, Luyun Lin, Yiqing Wang
arXiv · arXiv q-fin · 2023
In this paper, we discuss the Dutch power market, which is comprised of a day-ahead market and an intraday balancing market that operates like an auction. Due to fluctuations in power supply and demand, there is often an imbalance that leads to different prices in the two markets, providing an opportunity for arbitrage. To address this issue, we restructure the problem and propose a collaborative dual-agent reinforce…
Yuanrong Wang, Vignesh Raja Swaminathan, Nikita P. Granger, Carlos Ros Perez, Christian Michler
arXiv · arXiv q-fin · 2020
During any unique crisis, panic sell-off leads to a massive stock market crash that may continue for more than a day, termed as mainshock. The effect of a mainshock in the form of aftershocks can be felt throughout the recovery phase of stock price. As the market remains in stress during recovery, any small perturbation leads to a relatively smaller aftershock. The duration of the recovery phase has been estimated us…
Anish Rai, Ajit Mahata, Md Nurujjaman, Om Prakash