Universitätspublikationen
Refine
Document Type
- Article (3) (remove)
Language
- English (3)
Has Fulltext
- yes (3)
Is part of the Bibliography
- no (3) (remove)
Keywords
- barrier options (1)
- estimation risk (1)
- random covariance (1)
- structured products (1)
Institute
PRO-CYCLICALITY OF COLLATERAL HAIRCUTS AND MARGINS HAS BECOME A WIDELY PROCLAIMED BEHAVIOUR BUT EMPIRICAL EVIDENCE ON THIS TOPIC IS QUITE SPARSE AND THE DISCUSSIONS ARE PRIMARILY DRIVEN BY INSIGHTS DERIVED FROM THEORETICAL MODELS. BASED ON A UNIQUE DATA SET, WE CONSTRUCT A MEASURE OF SYSTEMIC ILLIQUIDITY OF BOND COLLATERALS AND APPLY BUBBLE DETECTION TECHNIQUES TO IDENTIFY IRRATIONAL BEHAVIOUR AND PRO-CYCLICAL TENDENCIES. FINALLY, WE PROPOSE A QUANTITATIVE TRIGGER AND DESIGN FOR MACROPRUDENTIAL HAIRCUT ADD-ONS.
AGAINST THE BACKGROUND OF FRAGMENTED EUROPEAN EQUITIES TRADING, MARKET OPERATORS HAVE EMPLOYED DIFFERENT STRATEGIES TO INCREASE LIQUIDITY ON THEIR MARKET RELATIVE TO OTHER TRADING VENUES. ONE OF THESE STRATEGIES IS TO INCENTIVIZE LIQUIDITY PROVIDERS VIA FEE REBATES. THIS ARTICLE PRESENTS AN EMPIRICAL INVESTIGATION OF THE INTRODUCTION OF THE XETRA LIQUIDITY PROVIDER PROGRAM AT DEUTSCHE BÖRSE AND ITS IMPACT ON LIQUIDITY AND TRADING VOLUME ON THE INTRODUCING MARKET ITSELF AND ON THE CONSOLIDATED EUROPEAN MARKET.
This paper presents a comprehensive extension of pricing two-dimensional derivatives depending on two barrier constraints. We assume randomness on the covariance matrix as a way of generalizing. We analyse common barrier derivatives, enabling us to study parameter uncertainty and the risk related to the estimation procedure (estimation risk). In particular, we use the distribution of empirical parameters from IBM and EURO STOXX50. The evidence suggests that estimation risk should not be neglected in the context of multidimensional barrier derivatives, as it could cause price differences of up to 70%.