Banking Regulation and Financial Accelerators: A One-Period Model with Unlimited Liability

In this paper, we analyze the consequences of bank regulation on the size of the real sector. In particular, we address the question whether exogenous shocks on the return-risk characteristics of the technology and on the equity of the real sector are intensified or damped by a value-at-risk constraint on the credit portfolio of a bank. We consider a one-period model with three risk-averse agents, an investor, a bank, and a firm. The size of the markets for deposits and loans, their prices and the size of the real sector are endogenous. We find that stricter regulation results in higher loan rates, lower deposit rates, and lower activity in the real sector. A negative shock on the return-risk position or on the risk buffer of the real sector reduces the activities in the economy. Surprisingly, the sensitivity of the real sector's activities on negative shocks is smaller for a regulated financial sector than for a non-regulated one. Therefore, in our economy, imperfections in the financial sector do not result in procyclical or acceleration effects

Explaining the Bond-CDS Basis: The role of credit risk and liquidity

We explore the relationship between CDS premia and bond asset swap spreads on the same reference entity. As Duffie (1999) shows, there is a clear theoretical link between CDS premia and bond prices if the two quantities are viewed as a pure measure of credit risk. However, many studies provide evidence that factors other than credit risk seem to affect bond prices and CDS premia, and these factors may partially obscure the relationship. We focus on the difference between the yield spread and the CDS premium, the bond-CDS basis, and show that the basis is highly sensitive to firm-specific and market wide credit risk and liquidity. If CDS and bonds are used in a dynamic hedging strategy or in a basis trading strategy that depends on the convergence of CDS and bond markets, it is necessary to correctly quantify the associated risks of these strategies. --

Time-varying credit risk and liquidity premia in bond and CDS markets

We develop a reduced-form model that allows us to decompose bond spreads and CDS premia into a pure credit risk component, a pure liquidity component, and a component measuring the relation between credit risk and liquidity. CDS liquidity has important consequences for the bond credit risk and liquidity components. Besides the credit risk link, we document a liquidity link between the bond and the CDS market. Liquidity in both markets dries up as credit risk increases, and higher bond market liquidity leads to lower CDS market liquidity. Ignoring CDS liquidity results in partly negative liquidity premia, particularly when CDS liquidity is low. --

The value of the early unwind option in futures contracts with an endogenous basis

In this paper the implicit early unwind option of a risk neutral arbitrageur is valued. The problem is analyzed in a market microstructure framework where four different groups of market participants interact. Within this model the equilibrium price relationship between stock and futures markets is determined. Since the underlying of the option is influenced by arbitrage trading the underlying of the option depends contrary to standard option pricing theory on the unwind option itself. The non-Markovian stochastic process of the basis is characterized and the results of an extensive comparative static analysis of the option value are presented. --

DAX Index Futures: Mispricing and Arbitrage in German Markets

The paper reports the results of an empirical study of the price relation between the German Performance Stock Index, DAX, and DAX futures. An ex-ante arbitrage strategy based on arbitrage signals is analyzed. The data set contains intraday bid- and ask futures quotes and index values on a minute by minute basis. It is found that the number and persistence of arbitrage opportunities differs considerably for futures nearest to deliver as compared to futures which are not nearest to deliver. The findings suggest that arbitrageurs trade mainly in futures nearest to deliver. The risk associated with arbitrage trading is found to be very small so that arbitrage profits are nearly risk free. --

Professional football sponsorship in the English Premier League and the German Bundesliga

Merged with duplicate record 10026.1/704 on 10.04.2017 by CS (TIS)This research project looks at professional football sponsorship from three different perspectives: the clubs' perspective (sponsorship as an income stream for professional football clubs), the sponsors' perspective (sponsorship as a marketing tool for companies), and a joint perspective (sponsorship as an inter-organisational relationship between professional football clubs and their sponsors). The English Premier League and the German Bundesliga serve as the subject of research owing to their extraordinarily sound reputation in commercial terms. A combination of qualitative and quantitative research methods was used in order to answer the research questions which derived from an extensive literature review. First, qualitative in-depth interviews with representatives of English Premier League and German Bundesliga clubs and their sponsors as well as sponsorship experts were carried out in order to gain a broader understanding of the phenomenon under scrutiny. Consequently, seven principal research propositions and six hypotheses were formulated relating to the size of the football business, the importance of sponsorship as an income stream, motives and objectives of sponsors, and the importance and dimensions of relationship quality. Then, two content analyses were carried out (including an analysis of more than 500 clubs' and sponsors' websites and 106 televised football games) in order to identify as many football sponsors of English Premier League and German Bundesliga clubs as possible. The research propositions were then tested in a quantitative survey incorporating all English Premier League and German Bundesliga clubs as well as 460 sponsors. Parametric as well as non-parametric tests were applied at this stage. The findings of the research partially confirmed previous studies. More importantly, new insights have been uncovered. For example, new dimensions of relationship quality in the context of professional football sponsorship have been identified. This study therefore has both theoretical and practical implications for professional football clubs, sponsoring companies and prospective researchers in the field of (professional) football sponsorship. The study also contributes significantly to existing knowledge about the football business, sponsorship and relationship marketing

Hedging langfristiger Lieferverpflichtungen mit kurzfristigen Futures: Möglich oder unmöglich?

Die Arbeit unterscheidet sich in verschiedenen wesentlichen Punkten von vorliegenden Untersuchungen. Auf der theoretischen Ebene werden alle Hedgestrategien aus einem einheitlichen Modellrahmen abgeleitet. Einzelne Varianten ergeben sich dabei durch unterschiedliche Spezifikationen der mit dem Halten von Öl verbundenen Erträge, der sog. Convenience Yield. Überraschenderweise lassen sich verschiedene der in der Diskussion um die Metallgesellschaft vorgeschlagenen Hedgestrategien, so unterschiedlich sie auf den ersten Blick auch begründet sind, aus dem betrachteten Modellrahmen gewinnen. Im empirischen Teil liefert die vorliegende Studie den ersten umfassenden Vergleich fünf theoriegestützter Strategien zum Hedging einer Lieferverpflichtung von Rohöl auf Termin in zehn Jahren, der Grundstruktur des Hedgeproblems der MGRM. Da angesichts der im Vergleich zum langfristigen Hedgehorizont relativ kurzen Historie verfügbarer Spot- und Futurespreise eine historische Simulation wenig Aussagekraft hat, wird anhand vorhandener Spot- und Futurespreise ein Modell zur Simulation verschiedener Preisszenarien entwickelt. Auf Basis der Hedgeergebnisse für eine Vielzahl simulierter Szenarien erfolgt eine Beurteilung der zu erwartenden Erträge und Risken der Strategien. Umfangreiche Stabilitätsanalysen prüfen die Sensitivität der Hedgeergebnisse bezüglich der in die Hedge-Ratios eingehenden Parameter, des verwendeten Datenfensters, der Mean-Reversion der Spotpreise und des Hedgehorizontes

Optimale Arbitragestrategien in Terminmärkten

Der folgende Beitrag analysiert das optimale Verhalten eines Investors, der Arbitrage zwischen Kassa- und Futuresmarkt betreibt. Gegenüber dem Standardmodell der cash & carry-Arbitrage wird der zulässige Strategieraum des Arbitrageurs erweitert, indem berücksichtigt wird, daß der Arbitrageur in der Vergangenheit eingegangene Arbitragepositionen jederzeit vor Fälligkeit glattstellen kann. ; The following article analyses the optimal arbitrage strategy of an investor in the spot and in the futures market. In contrast to the cost of carry model, the arbitrageur is not obliged to hold positions until maturity, but he may unwind arbitrage positions before maturity whenever it is favourable to hirn. --

Der DAX-Future: Kursverhalten und Arbitragemöglichkeiten

Der folgende Beitrag analysiert das Verhalten des DAX-Futures im ersten Jahr seines Bestehens und untersucht insbesondere die Arbitrage-Effizienz dieses neuen Marktes relativ zum Kassamarkt unter Verwendung sämtlicher Transaktionskurse. Dabei zeigt sich, daß die Anzahl. der Arbitragemöglichkeit im Zeitablauf deutlich abnimmt. ; The following article analyses the price behaviour of stock index futures in Germany during the fIrst year of trading. It especially addresses the question of arbitrage efficiency in this new financial rnarket using a cornplete set of transaction data. It can be shown that the number of free lunches in the stock index futures rnarket dramatically decreased. --

Hedging langfristiger Lieferverpflichtungen mit kurzfristigen Futures: möglich oder unmöglich?

Im Laufe des Jahres 1993 war die Metallgesellschaft Refining & Marketing (MGRM), eine US-amerikanische Tochtergesellschaft der Metallgesellschaft AG, in großem Umfang die Verpflichtung eingegangen, langfristig Öl zu Festpreisen zu liefern. Das dadurch entstehende Preisrisiko sollte über Derivate reduziert bzw. ausgeschaltet werden. Da die vorgesehenen Liefertermine bis zu zehn Jahre in der Zukunft lagen, existierten keine laufzeitäquivalenten Ölderivate. Statt dessen kaufte die MGRM eine dem gesamten zukünftigen Liefervolumen entsprechende Anzahl von Terminkontrakten mit kurzer Laufzeit von meist nur einem Monat. Bei Fälligkeit wurden die Positionen in den nächsten kurz laufenden Kontrakt überrollt. Diese Hedgestrategie führte letztlich zu einer Krise des gesamten Konzerns, die im Dezember 1993 in der Ablösung des Vorstandes, der schrittweisen Auflösung der Ölgeschäfte und Verlusten in Milliardenhöhe gipfelte. --