In this paper we formulate and test a number of hypotheses regarding insurer participation and volume decisions in derivatives markets. Several specific hypotheses are supported by our analysis. We find evidence consistent with the idea that insurers are motivated to use financial derivatives to hedge the costs of financial distress, interest rate, liquidity, and exchange rate risks. We also fi...

This article examines how the number of stochastic drivers and their associated volatility structures affect pricing accuracy and hedging performance in the swaption market. In spite of the fact that low dimensional one and two-factor models do not reflect historical correlations that exist among forward rates, we show that they are capable of accurately pricing swaptions as well as higher orde...

Trading a financial asset pushes its price as well the prices of other assets, phenomenon known cross-impact. The empirical estimation this effect on complex instruments, such derivatives, is an open problem, tackled in issue?s cover article ?Cross-impact Derivative Markets? by Michael Benzaquen, Mehdi Tomas and Iacopo Mastromatteo. To address this, authors consider setting which derivatives de...

However, due to the ever-changing conditions in financial markets, these instruments have further been used for speculative purposes and arbitrage opportunities. Nevertheless, this paper focuses on influence of derivative usage hedging profitability firms Turkish nonlife insurance industry. The data consists 25 non-life companies operating Turkey from 2009 2019, inclusive. findings based panel ...

This meeting was organised jointly by Darrell Duffie (Stanford), Paul Embrechts (Zürich) and Hans Föllmer (Berlin). In 28 talks and many informal discussions, it covered a wide range of problems in finance and insurance which involve advanced methods of stochastic analysis. Key topics included: – incomplete financial markets, in particular stochastic volatility, equilibrium analysis, stochastic...

Credit default swaps (CDS) are the most common type of credit derivatives used for hedging and speculative purposes in markets. We consider a representative risk-averse investor who has initial endowment instrument invests traditional financial instruments. Using utility indifference pricing approach, we construct framework single-name CDS contracts with periodic payments multi-period model. Mo...

he virulence of the 1998 turbulence in the mature financial markets took market participants and authorities by surprise , and some have acknowledged that they do not fully understand the rapidly changing structure and dynamics of global financial markets. 1 As last year's International Capital Markets report analyzed, a substantial buildup in derivatives credit exposures and leverage contribut...