Papers in this research project are concerned with the modeling and quantification of dependency structures and their implications for asset pricing.

The determinants of CDS spreads: evidence from the model space (Review of Derivatives Research 21, 63-118), with Johannes Vilsmeier, considers the case of CDS contracts. The paper shows that CDS price dynamics can be mainly explained by factors describing firms’ sensitivity to extreme market movements. Moreover, the paper shows that dynamic copula based measures of tail dependence incorporate most essential pricing information, making other potential determinants such as Merton-type factors or linear variables measuring the systematic market evolution negligible.

Pricing and issuance dependencies in structured financial product portfolios (Journal of Futures Markets 39, 342-365), with Andrea Schertler, studies pricing and issuance dependencies for the case of structured financial products (SFPs). The study provides evidence that beyond conventional hedging, cross-pricing and cross-issuance of warrants and discount certificates contributes to risk reductions. Consequently, these products play an important role as risk management tools.