Articles scientifiques

Catching Falling Knives: Speculating on Liquidity Shocks

J. E. COLLIARD

Management Science

août 2017, vol. 63, n°8, pp.2573-2591

Départements : Finance, GREGHEC (CNRS)

Mots clés : supply information • nonfundamental uncertainty • market crashes • arbitrage • high-frequency trading

http://pubsonline.informs.org/doi/pdf/10.1287/mnsc.2016.2440


Many market participants invest resources to acquire information about liquidity rather than fundamentals. I show that agents using such information can reduce the magnitude of short-lived pricing errors by trading against liquidity shocks. However, the short-run stabilizing effect of this behavior also makes it more difficult to identify liquidity shocks, a signal-jamming effect that slows down price discovery in the long run. As more agents invest in nonfundamental information, market prices become more resilient to liquidity shocks but also recover more slowly from temporary price deviations.

Dynamic Dependence and Diversification in Corporate Credit

Peter CHRISTOFFERSEN, Kris JACOBS, Xisong JIN, H. LANGLOIS-BERTRAND

Review of Finance

2017, pp.1-40

Départements : Finance, GREGHEC (CNRS)

Mots clés : Credit risk, Default risk, CDS, Dynamic dependence, Copula

https://academic.oup.com/rof/article/doi/10.1093/rof/rfx034/3980187/Dynamic-Dependence-and-Diversification-in


We characterize dependence in corporate credit and equity returns for 215 firms using a new class of large-scale dynamic copula models. Copula dependence and especially tail dependence are highly variable and persistent, increase significantly in the financial crisis, and have remained high since. The most drastic increases in credit dependence occur in July/August of 2007 and in August of 2011 and the decrease in diversification potential caused by the increases in dependence and tail dependence is large. Credit default swap correlation dynamics are important determinants of credit spreads

Housing Collateral and Entrepreneurship

Martin SCHMALZ, David SRAER, D. THESMAR

The Journal of Finance

février 2017, vol. 72, n°1, pp.99-132

Départements : Finance


We show that collateral constraints restrict firm entry and postentry growth, using French administrative data and cross-sectional variation in local house-price appreciation as shocks to collateral values. We control for local demand shocks by comparing treated homeowners to controls in the same region that do not experience collateral shocks: renters and homeowners with an outstanding mortgage, who (in France) cannot take out a second mortgage. In both comparisons, an increase in collateral value leads to a higher probability of becoming an entrepreneur. Conditional on entry, treated entrepreneurs use more debt, start larger firms, and remain larger in the long run.

Linear-Rational Term Structure Models

D. FILIPOVIC, M. LARSSON, A. TROLLE

The Journal of Finance

avril 2017, vol. 72, n°2, pp.655-704

Départements : Finance


We introduce the class of linear-rational term structure models in which the state price density is modeled such that bond prices become linear-rational functions of the factors. This class is highly tractable with several distinct advantages: (i) ensures nonnegative interest rates, (ii) easily accommodates unspanned factors affecting volatility and risk premiums, and (iii) admits semi-analytical solutions to swaptions. A parsimonious model specification within the linear-rational class has a very good fit to both interest rate swaps and swaptions since 1997 and captures many features of term structure, volatility, and risk premium dynamics—including when interest rates are close to the zero lower bound

Systemic Risk in Clearing Houses: Evidence from the European Repo Market

C. BOISSEL, F. DERRIEN, E. ORS, D. THESMAR

Journal of Financial Economics

septembre 2017, vol. 125, n°3, pp.511-536

Départements : Finance, GREGHEC (CNRS)

Mots clés : repurchase agreement; sovereign debt crisis; LTRO; secured money market lending; clearing houses

http://www.sciencedirect.com/science/article/pii/S0304405X17301277


We study how crises affect Central Clearing Counterparties (CCPs). We focus on a large and safe segment of CCP-cleared repo market during the Eurozone sovereign debt crisis. We develop a simple model to infer CCP stress, which is measured as repo rates’ sensitivity to sovereign CDS spreads and jointly captures (1) the effectiveness of haircut policies, (2) CCP-member default risk (conditional on sovereign default), and (3) CCP default risk (conditional on both sovereign and CCP-member default). During 2011, repo rates strongly respond to sovereign risk, particularly for GIIPS countries: repo investors behaved as if the conditional probability of CCP default was substantial. (100 words)


JavaScriptSettings