Economics and Finance

1907 Submissions

[4] viXra:1907.0406 [pdf] submitted on 2019-07-21 08:30:28

The Impact of Default Dependency and Collateralization on Asset Pricing and Credit Risk Modeling

Authors: Tim Xiao
Comments: 39 Pages.

This article presents a comprehensive framework for valuing financial instruments subject to credit risk. In particular, we focus on the impact of default dependence on asset pricing, as correlated default risk is one of the most pervasive threats in financial markets. We analyze how swap rates are affected by bilateral counterparty credit risk, and how CDS spreads depend on the trilateral credit risk of the buyer, seller, and reference entity in a contract. Moreover, we study the effect of collateralization on valuation, since the majority of OTC derivatives are collateralized. The model shows that a fully collateralized swap is risk-free, whereas a fully collateralized CDS is not equivalent to a risk-free one.
Category: Economics and Finance

[3] viXra:1907.0368 [pdf] submitted on 2019-07-20 04:41:17

The Present and the Future of the World Economy

Authors: Ilyas Oskembekov
Comments: 16 Pages.

This work is a continuation of the conversation about the qualitative heterogeneity of money, but already in the scale of the world economy. The features of this phenomenon, its sources of existence and the negative impact on the state of the world economy are considered on the model of the world economic system. The possibility of creating a new efficient world economic system with a qualitatively homogeneous money supply is shown.
Category: Economics and Finance

[2] viXra:1907.0316 [pdf] submitted on 2019-07-16 16:49:57

Avaliação de Perdas Nos Sistemas Públicos de Abastecimento de água no Estado de Sergipe

Authors: Marcos Luciano Alves Barroso
Comments: 11 Pages.

In recent years, little attention has been paid to investments in maintenance and modernization of the management of public water supply systems in many Brazilian cities. In the State of Sergipe, this fact has resulted in a series of inefficiencies in the supply, among which, the high loss of water, physical and financial for the state concessionaire in several cities stands out. Thus this work seeks to identify a picture of the conditions of water loss management in the public supply systems in the six largest municipalities of the State of Sergipe. The fact is therefore that the concessionaire indicates that the lack of technology that ensures better monitoring of public water supply systems in cities that also do not have modern equipment for the actual measurement of water distributed and consumed. Thus, the work was constructed accounting for information and indicators from the National Sanitation Information System (SNIS) that reveal the situation of cities in Sergipe from 2008 to 2017. They revealed that incentives for more efficient maintenance are limited and, in general, water is treated as a free good, stimulating non-payment and uncontrolled use of it. This situation creates many problems for the maintenance of the concessionaire and service providers, such as the production of water, which in most cases is much higher than necessary, amplifying production costs and providing a significant loss of water production in the physical loss. This represents cost incurred, part of the water is not charged, resulting in losses of billing, that is, the consumer consumes, but does not pay, resulting in costs of production and distribution without inferring revenue.
Category: Economics and Finance

[1] viXra:1907.0068 [pdf] submitted on 2019-07-04 17:33:48

An Economic Examination of Collateralization in Different Financial Markets

Authors: Tim Xiao
Comments: 40 Pages.

ABSTRACT This paper attempts to assess the economic significance and implications of collateralization in different financial markets, which is essentially a matter of theoretical justification and empirical verification. We present a comprehensive theoretical framework that allows for collateralization adhering to bankruptcy laws. As such, the model can back out differences in asset prices due to collateralized counterparty risk. This framework is very useful for pricing outstanding defaultable financial contracts. By using a unique data set, we are able to achieve a clean decomposition of prices into their credit risk factors. We find empirical evidence that counterparty risk is not overly important in credit-related spreads. Only the joint effects of collateralization and credit risk can sufficiently explain unsecured credit costs. This finding suggests that failure to properly account for collateralization may result in significant mispricing of financial contracts. We also analyze the difference between cleared and OTC markets.
Category: Economics and Finance