Related papers: Defaultable Bonds via HKA
We propose a model for the credit markets in which the random default times of bonds are assumed to be given as functions of one or more independent "market factors". Market participants are assumed to have partial information about each of…
We apply Geometric Arbitrage Theory to obtain results in mathematical finance for credit markets, which do not need stochastic differential geometry in their formulation. We obtain closed form equations involving default intensities and…
This paper extends an option-theoretic approach to estimate liquidity spreads for corporate bonds. Inspired by Longstaff's equity market framework and subsequent work by Koziol and Sauerbier on risk-free zero-coupon bonds, the model views…
In this article, we consider a 2 factors-model for pricing defaultable bond with discrete default intensity and barrier where the 2 factors are stochastic risk free short rate process and firm value process. We assume that the default event…
In this work we study the price-hedge issue for general defaultable contracts characterized by the presence of a contingent CSA of switching type. This is a contingent risk mitigation mechanism that allow the counterparties of a defaultable…
Using a suitable change of probability measure, we obtain a novel Poisson series representation for the arbitrage- free price process of vulnerable contingent claims in a regime-switching market driven by an underlying continuous- time…
One of the peculiarities of power and gas markets is the delivery mechanism of forward contracts. The seller of a futures contract commits to deliver, say, power, over a certain period, while the classical forward is a financial agreement…
The paper studies a system of Hamilton-Jacobi equations, arising from a stochastic optimal debt management problem in an infinite time horizon with exponential discount, modeled as a noncooperative interaction between a borrower and a pool…
We build a general model for pricing defaultable claims. In addition to the usual absence of arbitrage assumption, we assume that one defaultable asset (at least) looses value when the default occurs. We prove that under this assumption, in…
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…
In this paper, we consider the robust optimal reinsurance investment problem of the insurer under the $\alpha$-maxmin mean-variance criterion in the defaultable market. The financial market consists of risk-free bonds, a stock and a…
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 construct a no-arbitrage model of bond prices where the long bond is used as a numeraire. We develop bond prices and their dynamics without developing any model for the spot rate or forward rates. The model is arbitrage free and all…
We consider a defaultable asset whose risk-neutral pricing dynamics are described by an exponential Levy-type martingale subject to default. This class of models allows for local volatility, local default intensity, and a locally dependent…
In this paper we complete and extend our previous work on stochastic control applied to high frequency market-making with inventory constraints and directional bets. Our new model admits several state variables (e.g. market spread,…
We consider the problem of modelling the term structure of defaultable bonds, under minimal assumptions on the default time. In particular, we do not assume the existence of a default intensity and we therefore allow for the possibility of…
We provide analytical pricing formula of corporate defaultable bond with both expected and unexpected default in the case with stochastic default intensity. In the case with constant short rate and exogenous default recovery using PDE…
We construct models for the pricing and risk management of inflation-linked derivatives. The models are rational in the sense that linear payoffs written on the consumer price index have prices that are rational functions of the state…
In this paper we consider a reduced-form intensity-based credit risk model with a hidden Markov state process. A filtering method is proposed for extracting the underlying state given the observation processes. The method may be applied to…
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…