Related papers: Defining, Estimating and Using Credit Term Structu…
A negative basis trade enters a long bond position and buys protection on the issuer of the bond through credit default swap (CDS), aiming at arbitrage profit due to the bond-CDS basis. To classic reduced form model theorists, the existence…
This paper compares two different frameworks recently introduced in the literature for measuring risk in a multi-period setting. The first corresponds to applying a single coherent risk measure to the cumulative future costs, while the…
Credit risk in the China's bond market has become increasingly evident, creating a progressively escalating risk of default for credit bond investors. Given the current incomplete and inaccurate bond information disclosure, timely tracking…
Consistent Recalibration models (CRC) have been introduced to capture in necessary generality the dynamic features of term structures of derivatives' prices. Several approaches have been suggested to tackle this problem, but all of them,…
Expected Shortfall (ES) in several variants has been proposed as remedy for the defi-ciencies of Value-at-Risk (VaR) which in general is not a coherent risk measure. In fact, most definitions of ES lead to the same results when applied to…
We develop a model for the dynamic evolution of default-free and defaultable interest rates in a LIBOR framework. Utilizing the class of affine processes, this model produces positive LIBOR rates and spreads, while the dynamics are…
We build a 167-indicator comprehensive credit risk indicator set, integrating macro, corporate financial, bond-specific indicators, and for the first time, 30 large-scale corporate non-financial indicators. We use seven machine learning…
In the past few decades considerable effort has been expended in characterizing and modeling financial time series. A number of stylized facts have been identified, and volatility clustering or the tendency toward persistence has emerged as…
We consider a market with a term structure of credit risky bonds in the single-name case. We aim at minimal assumptions extending existing results in this direction: first, the random field of forward rates is driven by a general…
We study convexity and monotonicity properties for prices of bonds and bond options when the short rate is modeled by a diffusion process. We provide conditions under which convexity of the price in the short rate is guaranteed. Under these…
We propose a unified structural credit risk model incorporating both insolvency and illiquidity risks, in order to investigate how a firm's default probability depends on the liquidity risk associated with its financing structure. We assume…
We explore the statistical and economic importance of restrictions on the dynamics of risk compensation from the perspective of a real-time Bayesian learner who predicts bond excess returns using dynamic term structure models (DTSMs). The…
Pricing extremely long-dated liabilities market consistently deals with the decline in liquidity of financial instruments on long maturities. The aim is to quantify the uncertainty of rates up to maturities of a century. We assume that the…
In this work we consider three problems of the standard market approach to pricing of credit index options: the definition of the index spread is not valid in general, the usually considered payoff leads to a pricing which is not always…
We follow a long path for Credit Derivatives and Collateralized Debt Obligations (CDOs) in particular, from the introduction of the Gaussian copula model and the related implied correlations to the introduction of arbitrage-free dynamic…
We introduce a framework for quantifying propagation of uncertainty arising in a dynamic setting. Specifically, we define dynamic uncertainty sets designed explicitly for discrete stochastic processes over a finite time horizon. These…
In this paper, we introduce a new class of set-valued risk measures, named set-valued star-shaped risk measures. Motivated by the results of scalar monetary and star-shaped risk measures, this paper investigates the representation theorems…
We derive a closed-form approximation for the credit default swap (CDS) spread in the two-dimensional shifted square-root diffusion (SSRD) model using asymptotic coefficient expansion technique to approximate solutions of nonlinear partial…
Diffusion models play an essential role in modeling continuous-time stochastic processes in the financial field. Therefore, several proposals have been developed in the last decades to test the specification of stochastic differential…
This paper offers a brief review of cognitive verbs typically used in the literature to describe standard spreadsheet practices. The verbs identified are then categorised in terms of Bloom's Taxonomy of Hierarchical Levels, and then rated…