{"title":"Rehypothecation Dilemma: Impact of Collateral Rehypothecation on Derivative Prices Under Bilateral Counterparty Credit Risk","authors":"Y. Sakurai, Yoshihiko Uchida","doi":"10.2139/ssrn.2136785","DOIUrl":"https://doi.org/10.2139/ssrn.2136785","url":null,"abstract":"Rehypothecation is the practice where a derivatives dealer reuses collateral posted from its end user in over-the-counter (OTC) derivatives markets. Although rehypothecation benefits the end user through cost reduction of derivative trades, it also creates additional counterparty credit risk since the end user may not receive the collateral back when the dealer suddenly defaults. To evaluate the benefits and risks of rehypothecation, we propose a derivative pricing framework with bilateral counterparty credit risk that determines the amount of rehypothecable collateral. We also model the realistic features of derivative trades: two different types of collateral, the time delay of collateral posting and the rating-dependent collateral agreement. We apply our pricing framework to cross currency swaps and investigate the impact of rehypothecation on the swap spreads.","PeriodicalId":224126,"journal":{"name":"Special Issue: Systemic Risk 5","volume":"302 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-08-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116259789","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"The Knock-On Effect in Business Group: Evidence from Korean Chaebols Credit Rating Changes","authors":"S. Han, Yonghyun Kwon, E. Jo","doi":"10.2139/ssrn.2134310","DOIUrl":"https://doi.org/10.2139/ssrn.2134310","url":null,"abstract":"We examine the knock-on effect of credit rating changes in Korean Chaebol. We show that credit rating changes of chaebol-affiliated firm share the effect of credit rating change with related affiliates because: (1) chaebol affiliates share their internal capital markets and (2) chaebol affiliates are bounded together by cross-holdings. We conclude that impact of credit rating change of chaebol-affiliated firm spills over to other affiliates included in the same chaebols, and cross-holdings may determine the extent of the knock-on effect.","PeriodicalId":224126,"journal":{"name":"Special Issue: Systemic Risk 5","volume":"44 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-08-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124589010","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Bronwyn McCredie, P. Docherty, S. Easton, Katherine Uylangco
{"title":"An Analysis of the Australian Foreign Exchange Market Response to Monetary Policy Announcements and Explanatory Minute Releases","authors":"Bronwyn McCredie, P. Docherty, S. Easton, Katherine Uylangco","doi":"10.2139/ssrn.2132412","DOIUrl":"https://doi.org/10.2139/ssrn.2132412","url":null,"abstract":"In US and European jurisdictions, monetary policy announcements that set a target interest rate for overnight loans are followed promptly by projections materials or statements that explain the deliberation process. In Australia however, these releases are made separately with the announcement of the monthly target interbank cash rate for overnight loans being provided two weeks before the release of the minutes of the Reserve Bank board meeting that explicate the rate outcome. This study exploits this unique feature of the Australian monetary policy environment in order to examine the differential impact of monetary policy announcements and explanatory minute releases on the Australian foreign exchange market. Our results indicate that unexpected monetary policy announcements and explanatory minute releases have a significant impact on the Australian foreign exchange market. When this impact is differentiated, the informational content of an explanatory minutes release is shown to elicit a larger response. Further, conditioning on the state of the economy shows that returns following unexpected monetary policy announcements (explanatory minute releases) intensify (wane) during the Global Financial Crisis and are influenced by sentiment.","PeriodicalId":224126,"journal":{"name":"Special Issue: Systemic Risk 5","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-08-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122547285","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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