skip to primary navigationskip to content
 

F&A seminar - Pedro Saffi, Deleveragin Risk

When Feb 12, 2013
from 11:00 AM to 12:00 PM
Where CJBS, W2.01
Contact Name
Add event to calendar vCal
iCal

Pedro Saffi (Cambridge Judge Business School)

Deleveragin Risk

Abstract:
We assess whether deleveraging events have an impact on the cross section of stock returns. Deleveraging risk is the unique risk attributable to the existence of levered positions. When funding liquidity evaporates and short positions need to be covered, securities with greater presence of levered investors experience a significant shock as the levered investors unwind their positions. Using a unique dataset of equity lending data as a proxy for the degree of leverage in a stock, we find strong evidence of extreme return realizations attributable to the unwinding of these levered positions. We further find that these deleveraging risk events are attributable to (i) discrete liquidity events such as the quant crisis of August 2007 and the Lehman Brothers bankruptcy in September 2008, and (ii) reductions in funding liquidity as reflected in a variety of measures such as TED spread, LIBOR-OIS spread and credit risk of banks that facilitate the provision of levered capital to arbitrageurs.

« March 2017 »
March
MoTuWeThFrSaSu
12345
6789101112
13141516171819
20212223242526
2728293031

Upcoming events

Cambridge Finance Workshop - Erwan Morellec

May 04, 2017

Room W4.03, Cambridge Judge Business School

Cambridge Finance Workshop - Rene Stulz

May 18, 2017

Room W4.03, Cambridge Judge Business School

Cambridge Finance Workshop - Katrin Tinn

Jun 01, 2017

Room W4.03, Cambridge Judge Business School

Previous events

Upcoming events