Urban, Jörg

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Urban
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Jörg
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Urban, Jörg

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2018 - 20203
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Institut: Institut für Finanzmanagement ×

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  • Vorschaubild nicht verfügbar
    Publikation
    Estimating unknown arbitrage costs: evidence from a 3-regime threshold vector error correction model
    (Elsevier, 2020) Ters, Kristyna; Urban, Jörg [in: Journal of Financial Markets]
    We present a methodology for estimating a multivariate 3-regime threshold vector error correction model (TVECM) with an unknown cointegrating vector based on a new dynamic grid evaluation. This model is particularly useful for estimating deviations from parity conditions, such as unknown arbitrage costs in markets with a persistent non-zero basis between two similar financial market instruments traded in the spot and derivative markets. Our proposed 3-regime TVECM can estimate the area where arbitrageurs have no incentives to trade. It is only when the basis exceeds a critical threshold, that is when the potential gain from the basis trade exceeds the overall transaction costs, that we expect arbitrageurs to step in and carry out the respective trade. This leads to non-linear adjustment dynamics and regimes with different characteristics. Our methodology allows overall transaction costs to be quantified in markets where trading costs are opaque or unknown.
    01A - Beitrag in wissenschaftlicher Zeitschrift
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    Publikation
    Effectiveness of policy and regulation in European sovereign credit risk markets - A network analysis
    (Karlsruher Institut für Technologie (KIT), 2019) Buse, Rebekka; Schienle, Melanie; Urban, Jörg
    We study the impact of changes in regulations and policy interventions on systemic risk among European sovereign entities measured as volatility spillovers in respective credit risk markets. Our unique intraday CDS dataset allows for precise measurement of the effectiveness of these events in a network setting. In particular, it allows discerning interventions which entail significant changes in network cross-effects with appropriate bootstrap confidence intervals. We show that it was mainly regulatory changes with the ban of trading naked sovereign CDS in 2012 as well as the new ISDA regulations in 2014 which were most effective in reducing systemic risk. In comparison, we find that the effect of policy interventions was minor and generally not sustainable. In particular, they only had a significant impact when implemented for the first time and when targeting more than one country. For the volatility spillover channels, we generally find balanced networks with no fragmentation over time.
    05 - Forschungs- oder Arbeitsbericht
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    Publikation
    Price discovery in euro area sovereign credit markets and the ban on naked CDS
    (Elsevier, 2018) Gyntelberg, Jacob; Hördahl, Peter; Ters, Kristyna; Urban, Jörg [in: Journal of Banking & Finance]
    The sovereign debt crisis in the euro area saw credit spreads on sovereign bonds and credit default swaps (CDS) surge for a number of member states. The rise in sovereign yields was accompanied by a significant increase in sovereign CDS market activity. This pattern raised concerns that destabilising speculation via outright short-selling of CDS (so-called ‘naked CDS’) was behind the increase in bond yields. In response, policy-makers introduced a ban on naked CDS trading. We investigate the effect of the ban on the price discovery process of sovereign credit risk, contrasting results for the post-ban period with those obtained prior to the ban. We use intraday data on sovereign CDS and bonds across a number of euro area countries. Our first main finding is that the CDS market dominates the bond market in terms of price discovery. That is, CDS premia in most cases adjust quicker to reflect new information than bond spreads. This result holds also when taking into account transaction costs. Our second main finding is that the ban on short-selling did not alter price discovery dynamics or reduce the efficiency of the market. Finally, we find that prior to the ban, CDS spreads were persistently higher than bond credit spreads, even after controlling for transaction costs. This points to the presence of market frictions that limit the ability of arbitrage forces to fully close pricing gaps between the two markets. However, these pricing discrepancies were in many cases largely eliminated following the introduction of the ban.
    01A - Beitrag in wissenschaftlicher Zeitschrift