Related papers: Default Risk Modeling Beyond the First-Passage App…
In this paper we propose a copula contagion mixture model for correlated default times. The model includes the well known factor, copula, and contagion models as its special cases. The key advantage of such a model is that we can study the…
We study the pricing problem for corporate defaultable bond from the viewpoint of the investors outside the firm that could not exactly know about the information of the firm. We consider the problem for pricing of corporate defaultable…
We propose a unified framework for equity and credit risk modeling, where the default time is a doubly stochastic random time with intensity driven by an underlying affine factor process. This approach allows for flexible interactions…
We formulate and investigate a general stochastic control problem under a progressive enlargement of filtration. The global information is enlarged from a reference filtration and the knowledge of multiple random times together with…
Corporate failure resonates widely leaving practitioners searching for understanding of default risk. Managers seek to steer away from trouble, credit providers to avoid risky loans and investors to mitigate losses. Applying Topological…
In this note, we develop stock option price approximations for a model which takes both the risk o default and the stochastic volatility into account. We also let the intensity of defaults be influenced by the volatility. We show that it…
Validating safety-critical autonomous systems in high-dimensional domains such as robotics presents a significant challenge. Existing black-box approaches based on Markov chain Monte Carlo may require an enormous number of samples, while…
We derive a diffusion approximation for the kinetic Vlasov-Fokker-Planck equation in bounded spatial domains with specular reflection type boundary conditions. The method of proof involves the construction of a particular class of test…
Foundation models - already transformative in domains such as natural language processing - are now starting to emerge for time-series tasks in finance. While these pretrained architectures promise versatile predictive signals, little is…
We present a general framework for the estimation of corporate default based on a firm's capital structure, when its assets are assumed to follow a pure jump L\'evy processes; this setup provides a natural extension to usual default metrics…
Transition risk can be defined as the business-risk related to the enactment of green policies, aimed at driving the society towards a sustainable and low-carbon economy. In particular, the value of certain firms' assets can be lower…
In this Letter, we present a new formulation of loss cone theory as a reaction-diffusion system, which accounts for loss cone events through a sink term and can be orbit-averaged. It can recover the standard approach based on boundary…
We propose a credit risk model for portfolios composed of green and brown loans, extending the ASRF framework via a two-factor copula structure. Systematic risk is modeled using potentially skewed distributions, allowing for asymmetric…
This paper presents a new model for pricing financial derivatives subject to collateralization. It allows for collateral arrangements adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized…
Machine-learned black-box policies are ubiquitous for nonlinear control problems. Meanwhile, crude model information is often available for these problems from, e.g., linear approximations of nonlinear dynamics. We study the problem of…
The impact of a stress scenario of default events on the loss distribution of a credit portfolio can be assessed by determining the loss distribution conditional on these events. While it is conceptually easy to estimate loss distributions…
We propose a semi-structured discrete-time multi-state model to analyse mortgage delinquency transitions. This model combines an easy-to-understand structured additive predictor, which includes linear effects and smooth functions of time…
The standard Black-Scholes theory of option pricing is extended to cope with underlying return fluctuations described by general probability distributions. A Langevin process and its related Fokker-Planck equation are devised to model the…
Economists often estimate models using data from a particular domain, e.g. estimating risk preferences in a particular subject pool or for a specific class of lotteries. Whether a model's predictions extrapolate well across domains depends…
We address the so-called calibration problem which consists of fitting in a tractable way a given model to a specified term structure like, e.g., yield or default probability curves. Time-homogeneous jump-diffusions like Vasicek or…