RiskNET eLibrary
Sie möchten Ihre Publikation gerne in unserer eLibrary veröffentlichen?
Risk management plays a central role in institutional investors’ allocation of capital to trading. For instance, Jorion (2000, page xxiii) states that value-at-risk (VaR) “is now increasingly used to allocate capital across traders, business units, products, and even to the whole institution.” This paper studies how risk management practices can affect market liquidity and prices. We first show that tighter risk management leads to lower market liquidity, in that it takes longer to find a buyer with unused risk-bearing capacity, and, since liquidity is priced, to lower prices.
12026 Downloads07.01.2007
Datei downloaden This paper argues that banks have a unique ability to hedge against systematic liquidity shocks. Deposit inflows provide a natural hedge for loan demand shocks that follow declines in market liquidity. Consequently, one dimension of bank “specialness” is that banks can insure firms against systematic declines in market liquidity at lower cost than other financial institutions. We provide supporting empirical evidence from the commercial paper (CP) market. When market liquidity dries up and CP rates rise, banks experience funding inflows, allowing them to meet increased loan demand from borrowers drawing funds from pre-existing commercial paper backup lines without running down their holding of liquid assets. Moreover, the supply of cheap funds is sufficiently large so that pricing on new lines of credit actually falls as market spreads widen.
11737 Downloads07.01.2007
Datei downloaden While there is no equilibrium framework for defining liquidity risk per se, several plausible arguments suggest that liquidity risk is pervasive and thus may be priced. For example, market frictions increase the cost of hedging strategies requiring frequent portfolio rebalancing. Also, liquidity risk is likely to play a role whenever the market declines and investors are prevented from hedging via short positions. Using monthly return data from 1963–2000, and a broad set of test assets, we examine six candidate factor representations of aggregate liquidity risk, and test whether any one of these are priced. The results are interesting. First, with the surprising exception of the recent measure proposed by Pastor and Stambaugh (2001), liquidity factor shocks induce co-movements in individual stocks’ liquidity measure (commonality in liquidity). The commonality is similar to that found in the extant literature (Chordia, Roll, and Subrahmanyam(2000)), which so far has been restricted to a single year of data. Second, again with the exception of the Pastor-Stambaugh measure, the liquidity factors receive statistically significant betas when added to the Fama-French model. Third, maximum-likelihood estimates of the risk premium are significant for the measure based on bid-ask spreads, contemporaneous turnover, as well as the Pastor-Stambaugh measure, which exploits price reversals following volume shocks. Overall, the simple-to-compute, “low-minus-high” turnover factor first proposed by Eckbo and Norli (2000) appears to do as least as well as the other factor measures.
8586 Downloads07.01.2007
Datei downloaden Abstract: Using a large data set on credit default swaps, we study how default risk interacts with interest-rate risk and liquidity risk to jointly determine the term structure of credit spreads. We classify the reference companies into two broad industry sectors, two broad credit rating classes, and two liquidity groups. We develop a class of dynamic term structure models that include (i) two benchmark interest-rate factors to capture the libor and swap rates term structure, (ii) two credit-risk factors to capture the credit swap spreads of high-liquidity group of each industry and rating class, and (iii) both an additional credit-risk factor and a liquidity-risk factor to capture the difference between the high- and low-liquidity groups. Estimation shows that companies in different industry and credit rating classes have different credit-risk dynamics. Nevertheless, in all cases, credit risks exhibit intricate dynamic interactions with the interest rate factors. Interest-rate factors both affect credit spreads simultaneously, and impact subsequent moves in the credit-risk factors. Within each industry and credit rating class, we also find that the average credit default swap spreads for the high-liquidity group are significantly higher than for the low-liquidity group. Estimation shows that the difference is driven by both credit risk and liquidity differences. The low-liquidity group has a lower default arrival rate and also a much heavier discounting induced by the liquidity risk.
11977 Downloads07.01.2007
Datei downloaden Classical theories of financial markets assume an infinitely liquid market and that all traders act as price takers. This theory is a good approximation for highly liquid stocks, although even there it does not apply well for large traders or for modelling transaction costs. We extend the classical approach by formulating a new model that takes into account illiquidities. Our approach hypothesizes a stochastic supply curve for a security's price as a function of trade size. This leads to a new definition of a self-financing trading strategy, additional restrictions on hedging strategies, and some interesting mathematical issues.
8216 Downloads07.01.2007
Datei downloaden We develop a structural bond valuation model to simultaneously capture liquidity and credit risk. Our model implies that renegotiation in financial distress is influenced by the illiquidity of the market for distressed debt. As default becomes more likely, the components of bond yield spreads attributable to illiquidity increase. When we consider finite maturity debt, we find decreasing and convex term structures of liquidity spreads. Using bond price data spanning 15 years, we find evidence of a positive correlation between the illiquidity and default components of yield spreads as well as support for downward sloping term structures of liquidity spreads.
8470 Downloads07.01.2007
Datei downloaden Introduction: The turmoil in financial markets in late 1998 accompanied a sharp decrease in market liquidity. Some financial institutions faced unexpectedly high bid-ask spreads when liquidating positions. This paper is an analysis of the effect on key risk measures (such as the likelihood of insolvency, value at risk, and expected tail loss) of bid-ask spreads that are likely to widen just when positions must be liquidated in order to maintain capital ratios, thus triggering additional losses. Our results show that illiquidity causes significant increases in risk measures, especially if spreads are negatively correlated with asset returns. A potential strategy is to liquidate illiquid assets earlier, keeping a cushion of cash or liquid assets for "rainy days." Our results show that, although this approach is usually effective, it tends to increase expected trading costs, and may fail when asset returns and bid-ask spreads have fat tails.
7707 Downloads07.01.2007
Datei downloaden Dieser Beitrag stellt verschiedene ökonometrische Methoden zur Bewertung und Berechnung von Kreditausfallrisiken vor und wendet diese auf einen Datensatz sechs deutscher Universalbanken an. Im Mittelpunkt stehen dabei Logit- und Probitmodelle, mit deren Hilfe die Ausfallwahrscheinlichkeit eines Kredites geschätzt werden kann. Dabei werden auch moderne Verfahren zur Analyse von Paneldaten besprochen. Beispiele und Interpretationshilfen zu den jeweils vorgestellten Methoden erleichtern den Zugang zu diesen Modellen. Es werden zahlreiche Hinweise auf weiterführende Literatur gegeben. [Quelle: Ulrich Kaiser/Andrea Szczesny, Working Paper Series: Finance & Accounting, Johann Wolfgang Goethe-Universität Frankfurt am Main, Dezember 2000
9353 Downloads04.01.2007
Datei downloaden Im Mittelpunkt dieses Beitrag stehen Verweildauermodelle und deren Verwendung als Analyseinstrumente für die Bewertung und Berechnung von Kreditausfallrisiken. Verschiedene Möglichkeiten zur Berechnung der Dauer des Nichtausfalls eines Kredites werden dabei vorgestellt. Die hier vorgestellten Verfahren werden auf einen aus Kreditakten von sechs deutschen Universalbanken zusammengestellten Datensatz angewendet. Beispiele und Interpretationshilfen zu den jeweils vorgestellten Methoden erleichtern den Zugang zu diesen Modellen. Es werden zahlreiche Hinweise auf weiterführende Literatur gegeben. [Quelle: Ulrich Kaiser/Andrea Szczesny, Working Paper Series: Finance & Accounting, Johann Wolfgang Goethe-Universität Frankfurt am Main, Dezember 2000]
8434 Downloads04.01.2007
Datei downloaden Collateralized Debt Obligations (CDOs) stellen ein – insbesondere in jüngerer Zeit – stark wachsendes Segment der Asset-Backed Securities dar. Der Begriff der Asset-Backed Securities ist historisch zu sehen und umfasst nach klassischer Vorstellung Wertschriften, deren Bedienung durch einen rechtlich verselbständigten, diversifizierten Pool möglichst homogener Aktiven gesichert wird, wobei der Pool der Aktiven mit den im Rahmen der Emission der Wertschriften zugeflossenen liquiden Mitteln durch eine eigens zu diesem Zweck gegründete Gesellschaft erworben wurde.2 Im Fall von CDO-Transaktionen stellen die Wertschriften schuldrechtliche, an organisierten Kapitalmärkten platzierte Finanztitel dar. Die als Sicherheit dienenden Aktiven sind Kredite, die zumeist von Kreditinstituten syndiziert worden sind. Kreditinstitute können mit CDOs im Rahmen der Risikosteuerung von Kreditportfolios unerwünschte Risikopositionen unter Einbeziehung des organisierten Kapitalmarktes veräußern und über anschließende Investments gewünschte Rendite-Risikostrukturen aufbauen. Mit der Entwicklung von Kreditderivaten – insbesondere von Credit Default Swaps (CDS) – eröffneten sich neue Möglichkeiten der Ausgestaltung von CDO-Transaktionen. [Quelle: Stephan Jortzik, Dissertation zur Erlangung des wissenschaftlichen Doktorgrades des Fachbereichs Wirtschaftswissenschaften der Universität Göttingen]
12213 Downloads04.01.2007
Datei downloaden 