Stock loans with liquidation
Parsiad Azimzadeh
TL;DR
This paper develops a semi-analytic model for stock loans with liquidation triggers, analyzing how the contract's features respond to various model parameters.
Contribution
It introduces a semi-analytic solution for stock loans with liquidation, providing insights into parameter sensitivity.
Findings
The model quantifies the impact of liquidation thresholds.
Sensitivity analysis of contract parameters.
Provides a framework for pricing stock loans with liquidation.
Abstract
We derive a "semi-analytic" solution for a stock loan in which the lender forces liquidation when the loan-to-collateral ratio drops beneath a certain threshold. We use this to study the sensitivity of the contract to model parameters.
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Taxonomy
TopicsStochastic processes and financial applications · Banking stability, regulation, efficiency · Housing Market and Economics