Related papers: Discrete tenor models for credit risky portfolios …
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 present a new model for credit index derivatives, in the top-down approach. This model has a dynamic loss intensity process with volatility and jumps and can include counterparty risk. It handles CDS, CDO tranches, Nth-to-default and…
This paper introduces a novel stochastic model for credit spreads. The stochastic approach leverages the diffusion of default intensities via a CIR++ model and is formulated within a risk-neutral probability space. Our research primarily…
Explicitly taking into account the risk incurred when borrowing at a shorter tenor versus lending at a longer tenor ("roll-over risk"), we construct a stochastic model framework for the term structure of interest rates in which a frequency…
This paper introduces a new semi-parametric approach to the pricing and risk management of bespoke CDO tranches, with a particular attention to bespokes that need to be mapped onto more than one reference portfolio. The only user input in…
We develop theory and applications of forward characteristic processes in discrete time following a seminal paper of Jan Kallsen and Paul Kr\"uhner. Particular emphasis is placed on the dynamics of volatility surfaces which can be easily…
Models which postulate lognormal dynamics for interest rates which are compounded according to market conventions, such as forward LIBOR or forward swap rates, can be constructed initially in a discrete tenor framework. Interpolating…
In this paper we develop a framework for discretely compounding interest rates which is based on the forward price process approach. This approach has a number of advantages, in particular in the current market environment. Compared to the…
This study deals with the pricing and hedging of single-tranche collateralized debt obligations (STCDOs). We specify an affine two-factor model in which a catastrophic risk component is incorporated. Apart from being analytically tractable,…
We propose a parsimonious class of arbitrage-free, yields-only dynamic term structure models (DTSMs) with unspanned latent risks. To enable sequential estimation and forecasting, we develop a Sequential Monte Carlo framework that combines…
Mathematical models of biological populations commonly use discrete structure classes to capture trait variation among individuals (e.g. age, size, phenotype, intracellular state). Upscaling these discrete models into continuum descriptions…
We introduce a novel machine learning model for credit risk by combining tree-boosting with a latent spatio-temporal Gaussian process model accounting for frailty correlation. This allows for modeling non-linearities and interactions among…
We study continuous-time portfolio choice with nonlinear payoffs under smooth ambiguity and Bayesian learning. We develop a general framework for dynamic, non-concave asset allocation that accommodates nonlinear payoffs, broad utility…
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…
The paper studies problem of continuous time optimal portfolio selection for a incom- plete market diffusion model. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can…
This paper introduces a physics-informed generative framework that resolves the fundamental conflict between the statistical flexibility of deep learning and the rigorous theoretical constraints of fixed-income modeling. We demonstrate that…
We consider the class of affine LIBOR models with multiple curves, which is an analytically tractable class of discrete tenor models that easily accommodates positive or negative interest rates and positive spreads. By introducing an…
We develop a stochastic volatility framework for modeling multiple currencies based on CBI-time-changed L\'evy processes. The proposed framework captures the typical risk characteristics of FX markets and is coherent with the symmetries of…
A diversified risk-adjusted time-series momentum (TSMOM) portfolio can deliver substantial abnormal returns and offer some degree of tail risk protection during extreme market events. The performance of existing TSMOM strategies, however,…
In the top-down approach to multi-name credit modeling, calculation of singe name sensitivities appears possible, at least in principle, within the so-called random thinning (RT) procedure which dissects the portfolio risk into individual…