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Credit derivatives have enjoyed explosive growth in the last decade, particularly synthetic Collateralised Debt Obligations (synthetic CDOs). This book describes the state-of-the-art in quantitative and computational modelling of CDOs. Beginning with an overview of the structured finance landscape, readers are introduced tothe basic modelling concepts necessary to model and value simple credit derivatives. The modelling, valuation and risk management of synthetic CDOs are described and a detailed picture of the behaviour of these complex instruments is built up. The final chapters introduce more advanced topics such as portfolio management of synthetic CDOs and hedging techniques. Detailing the latest models and techniques, this is essential reading for quantitative analysts, traders and risk managers working in investment banks, hedge funds and other financial institutions, and for graduates intending to enter the industry. It is also ideal for academics who need to keep informed with current best practice in the credit derivatives industry.
Mathematical Sciences --- General and Others --- Collateralized debt obligations. --- Finance. --- Funding --- Funds --- Economics --- Currency question --- CDOs (Collateralized debt obligations) --- Credit derivatives
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AA / International- internationaal --- 333.745 --- 333.605 --- 333.632.0 --- Collateralized debt obligations --- 332.632 --- CDOs (Collateralized debt obligations) --- Credit derivatives --- effectisering. Titrisatie. --- Nieuwe financiële instrumenten. --- Obligaties: algemeenheden. --- Nieuwe financiële instrumenten --- Obligaties: algemeenheden --- effectisering. Titrisatie --- Collateralized debt obligations.
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The author focuses on a method to price Collateralized Debt Obligations (CDO) tranches. The original method is developed by Castagna, Mercurio and Mosconi in 2012. The Thesis provides an extension of the original work by generalizing the Gaussian dependence in terms of Copula functions. In particular the model is rewritten for the specific case of the Clayton copula. The method is applied to price the tranches of a CDX. By comparing the tranches prices, it is possible to notice that the Clayton approach leads to smaller equity and mezzanine tranches. The senior and super senior tranches levels are higher when the dependence is modeled by a Clayton copula. Contents CDO: General Characteristics Credit Risk Modeling Copula Functions and Dependency Concepts Moment Matching Approximation Extensions to the Model Implementation Target Groups Researchers in the field of Finance Practitioners of Financial Institutions The Author Enrico Marcantoni obtained his Master Degree in Quantitative Finance at the University of Bologna (Italy) taking part in a Double Degree Program in collaboration with the Master in Quantitative Asset and Risk Management at the University of Applied Sciences (bfi) Vienna (Austria).
Asset-backed financing. --- Debt. --- Mortgage-backed securities -- United States. --- Management --- Commerce --- Business & Economics --- Management Theory --- Local Commerce --- Collateralized debt obligations --- Copulas (Mathematical statistics) --- Mathematical models. --- CDOs (Collateralized debt obligations) --- Business. --- Management science. --- Finance. --- Business and Management. --- Business and Management, general. --- Finance, general. --- Distribution (Probability theory) --- Credit derivatives --- Funding --- Funds --- Economics --- Currency question --- Trade --- Industrial management --- Quantitative business analysis --- Problem solving --- Operations research --- Statistical decision
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This book considers the one-factor copula model for credit portfolios that are used for pricing synthetic CDO structures as well as for risk management and measurement applications involving the generation of scenarios for the complete universe of risk factors and the inclusion of CDO structures in a portfolio context. For this objective, it is especially important to have a computationally fast model that can also be used in a scenario simulation framework. The well known Gaussian copula model is extended in various ways in order to improve its drawbacks of correlation smile and time inconsistency. Also the application of the large homogeneous cell assumption, that allows to differentiate between rating classes, makes the model convenient and powerful for practical applications. The Crash-NIG extension introduces an important regime-switching feature allowing the possibility of a market crash that is characterized by a high-correlation regime.
Asset-backed financing. --- Collateralized debt obligations. --- Credit -- Mathematical models. --- Investment analysis. --- Finance --- Business & Economics --- Investment & Speculation --- Finance - General --- Banking --- Credit --- Mathematical models. --- CDOs (Collateralized debt obligations) --- Finance. --- Applied mathematics. --- Engineering mathematics. --- Economics, Mathematical. --- Finance, general. --- Quantitative Finance. --- Applications of Mathematics. --- Credit derivatives --- Mathematics. --- Math --- Science --- Funding --- Funds --- Economics --- Currency question --- Economics, Mathematical . --- Engineering --- Engineering analysis --- Mathematical analysis --- Mathematical economics --- Econometrics --- Mathematics --- Methodology --- Social sciences --- Financial Economics. --- Mathematics in Business, Economics and Finance.
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In global financial centers, short-term market rates are effectively determined in the pledged collateral market, where banks and other financial institutions exchange collateral (such as bonds and equities) for money. Furthermore, the use of long-dated securities as collateral for short tenors—or example, in securities-lending and repo markets, and prime brokerage funding—impacts the risk premia (or moneyness) along the yield curve. In this paper, we deploy a methodology to show that transactions using long dated collateral also affect short-term market rates. Our results suggest that the unwind of central bank balance sheets will likely strengthen the monetary policy transmission, as dealer balance-sheet space is now relatively less constrained, with a rebound in collateral reuse.
Collateralized debt obligations. --- CDOs (Collateralized debt obligations) --- Credit derivatives --- Accounting --- Banks and Banking --- Investments: General --- Industries: Financial Services --- Investments: Bonds --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financial Institutions and Services: Government Policy and Regulation --- International Monetary Arrangements and Institutions --- Corporation and Securities Law --- General Financial Markets: Government Policy and Regulation --- International Financial Markets --- Central Banks and Their Policies --- Public Administration --- Public Sector Accounting and Audits --- General Financial Markets: General (includes Measurement and Data) --- Finance --- Banking --- Financial reporting, financial statements --- Investment & securities --- Collateral --- Central bank balance sheet --- Financial statements --- Securities --- Financial institutions --- Central banks --- Public financial management (PFM) --- Bonds --- Loans --- Finance, Public --- Banks and banking --- Financial instruments --- United States
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The financial and economic crisis had a devastating impact on bank profits, with loss-making banks reporting global commercial losses of around USD 400 billion in 2008. This comprehensive report sets the market context for bank losses and provides an overview of the tax treatment of such losses in 17 OECD countries; describes the tax risks that arise in relation to bank losses from the perspective of both banks and revenue bodies; outlines the incentives that give rise to those risks; and describes the tools revenue bodies have to manage these potential compliance risks. It concludes with recommendations for revenue bodies and for banks on how risks involving bank losses can best be managed and reduced.
Banks and banking, Central. --- Collateralized debt obligations. --- Inflation (Finance). --- Tax incentives. --- Finance --- Business & Economics --- Banking --- Banks and banking --- Global Financial Crisis, 2008-2009. --- Taxation --- Global Economic Crisis, 2008-2009 --- Subprime Mortgage Crisis, 2008-2009 --- Agricultural banks --- Banking industry --- Commercial banks --- Depository institutions --- Financial crises --- Financial institutions --- Money
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Large banks and dealers use and reuse collateral pledged by nonbanks, which helps lubricate the global financial system. The supply of collateral arises from specific investment strategies in the asset management complex, with the primary providers being hedge funds, pension funds, insurers, official sector accounts, money markets and others. Post-Lehman, there has been a significant decline in the source collateral for the large dealers that specialize in intermediating pledgeable collateral. Since collateral can be reused, the overall effect (i.e., reduced ?source' of collateral times the velocity of collateral) may have been a $4-5 trillion reduction in collateral. This decline in financial lubrication likely has impact on the conduct of global monetary policy. And recent regulations aimed at financial stability, focusing on building equity and reducing leverage at large banks/dealers, may also reduce financial lubrication in the nonbank/bank nexus.
Collateralized debt obligations --- Bank loans --- CDOs (Collateralized debt obligations) --- Credit derivatives --- Bank credit --- Loans --- Econometric models. --- Accounting --- Banks and Banking --- Investments: General --- Industries: Financial Services --- Public Finance --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financial Institutions and Services: Government Policy and Regulation --- International Monetary Arrangements and Institutions --- General Financial Markets: Government Policy and Regulation --- International Financial Markets --- General Financial Markets: General (includes Measurement and Data) --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Public Administration --- Public Sector Accounting and Audits --- Social Security and Public Pensions --- Finance --- Investment & securities --- Financial reporting, financial statements --- Banking --- Pensions --- Collateral --- Securities --- Hedge funds --- Financial statements --- Financial institutions --- Public financial management (PFM) --- Pension spending --- Expenditure --- Financial instruments --- Financial services industry --- Finance, Public --- Banks and banking --- United States
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Financial lubrication in markets is indifferent to margin posting via money or collateral; the relative price(s) of money and collateral matter. Some central banks are now a major player in the collateral markets. Analogous to a coiled spring, the larger the quantitative easing (QE) efforts, the longer the central banks will impact the collateral market and associated repo rate. This may have monetary policy and financial stability implications since the repo rates map the financial landscape that straddles the bank/nonbank nexus.
Monetary policy. --- Collateralized debt obligations. --- CDOs (Collateralized debt obligations) --- Credit derivatives --- Monetary management --- Economic policy --- Currency boards --- Money supply --- Accounting --- Banks and Banking --- Industries: Financial Services --- Money and Monetary Policy --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financial Institutions and Services: Government Policy and Regulation --- International Monetary Arrangements and Institutions --- Corporation and Securities Law --- General Financial Markets: Government Policy and Regulation --- International Financial Markets --- Interest Rates: Determination, Term Structure, and Effects --- Public Administration --- Public Sector Accounting and Audits --- Monetary Policy --- Finance --- Banking --- Financial reporting, financial statements --- Monetary economics --- Collateral --- Repo rates --- Central bank policy rate --- Financial statements --- Financial institutions --- Financial services --- Public financial management (PFM) --- Unconventional monetary policies --- Monetary policy --- Loans --- Interest rates --- Banks and banking --- Finance, Public --- United States
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We study a dynamic economy where credit is limited by insufficient collateral and, as a result, investment and output are too low. In this environment, changes in investor sentiment or market expectations can give rise to credit bubbles, that is, expansions in credit that are backed not by expectations of future profits (i.e. fundamental collateral), but instead by expectations of future credit (i.e. bubbly collateral). During a credit bubble, there is more credit available for entrepreneurs: this is the crowding-in effect. But entrepreneurs must also use some of this credit to cancel past credit: this is the crowding-out effect. There is an "optimal" bubble size that trades off these two effects and maximizes long-run output and consumption. The “equilibrium” bubble size depends on investor sentiment, however, and it typically does not coincide with the “optimal” bubble size. This provides a new rationale for macroprudential policy. A lender of last resort can replicate the “optimal” bubble by taxing credit when the "equilibrium" bubble is too high, and subsidizing credit when the “equilibrium” bubble is too low. This leaning-against-the-wind policy maximizes output and consumption. Moreover, the same conditions that make this policy desirable guarantee that a lender of last resort has the resources to implement it.
Credit --- Collateralized debt obligations --- Business cycles --- CDOs (Collateralized debt obligations) --- Credit derivatives --- Borrowing --- Finance --- Money --- Loans --- Econometric models. --- Financial Risk Management --- Money and Monetary Policy --- Industries: Financial Services --- Production and Operations Management --- Current Account Adjustment --- Short-term Capital Movements --- International Lending and Debt Problems --- Financial Aspects of Economic Integration --- Open Economy Macroeconomics --- Economic Growth of Open Economies --- International Business Cycles --- Globalization: Finance --- International Financial Markets --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Financial Institutions and Services: Government Policy and Regulation --- Macroeconomics: Production --- Monetary economics --- Economic & financial crises & disasters --- Macroeconomics --- Collateral --- Lender of last resort --- Productivity --- Financial institutions --- Financial crises --- Production --- Industrial productivity --- Banks and banking, Central --- Slovak Republic