The Distribution of Defaults on Margin Loans

descriptionPublicationkeyboard_double_arrow_right Article , Other literature type 01 Jan 2020 English Publisher:Elsevier BVJournal:SSRN Electronic Journal (eissn: 1556-5068,

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Authors: Joseph Clark;

doi: 10.2139/ssrn.3547176

The Distribution of Defaults on Margin Loans

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Abstract

We define a class of margin loans and derive the distribution of defaults. The default risk from an individual loan can be priced as a series of forward starting options with a knockout. Under simple price dynamics this has an explicit solution.

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RMIT University
Australia

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