Related papers: Bivariate Semi-Markov Process for Counterparty Cre…

Recently bipartite graphs have been widely used to represent the relationship two sets of items for information retrieval applications. The Web offers a wide range of data which can be represented by bipartite graphs, such us movies and…

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…

This paper studies pricing derivatives in an age-dependent semi-Markov modulated market. We consider a financial market where the asset price dynamics follow a regime switching geometric Brownian motion model in which the coefficients…

We present a detailed analysis of interest rate derivatives valuation under credit risk and collateral modeling. We show how the credit and collateral extended valuation framework in Pallavicini et al (2011), and the related collateralized…

In classical Markov Decision Processes (MDPs), action costs and transition probabilities are assumed to be known, although an accurate estimation of these parameters is often not possible in practice. This study addresses MDPs under cost…

In this paper we present the classical results of Kolmogorov's backward and forward equations to the case of a two-parameter Markov process. These equations relates the infinitesimal transition matrix of the two-parameter Markov process.…

In the paper we study dynamics of the arbitrage prices of credit default swaps within a hazard process model of credit risk. We derive these dynamics without postulating that the immersion property is satisfied between some relevant…

This paper develops risk-averse models to support system operators in planning and operating the electricity grid under uncertainty from renewable power generation. We incorporate financial risk hedging using conditional value at risk…

It is commonly accepted that Commodities futures and forward prices, in principle, agree under some simplifying assumptions. One of the most relevant assumptions is the absence of counterparty risk. Indeed, due to margining, futures have…

Credit risk prediction is an effective way of evaluating whether a potential borrower will repay a loan, particularly in peer-to-peer lending where class imbalance problems are prevalent. However, few credit risk prediction models for…

This paper introduces a new model for node behavior namely Correlated Node Behavior Model which is an extension of Node Behavior Model. The model adopts semi Markov process in continuous time which clusters the node that has correlation.…

Cumulative prospect theory (CPT) is the first theory for decision-making under uncertainty that combines full theoretical soundness and empirically realistic features [P.P. Wakker - Prospect theory: For risk and ambiguity, Page 2]. While…

Whereas classical Markov decision processes maximize the expected reward, we consider minimizing the risk. We propose to evaluate the risk associated to a given policy over a long-enough time horizon with the help of a central limit…

Credit risk assessment is a crucial aspect of financial decision-making, enabling institutions to predict the likelihood of default and make informed lending decisions. Two prominent methodologies in credit risk modeling are logistic…

In this note we sketch an initial tentative approach to funding costs analysis and management for contracts with bilateral counterparty risk in a simplified setting. We depart from the existing literature by analyzing the issue of funding…

We provide a novel method for sensitivity analysis of parametric robust Markov chains. These models incorporate parameters and sets of probability distributions to alleviate the often unrealistic assumption that precise probabilities are…

In this paper we propose a multi-state model for the evaluation of the conversion option contract. The multi-state model is based on age-indexed semi-Markov chains that are able to reproduce many important aspects that influence the…

We propose a model for the credit and liquidity risks faced by clearing members of Central Counterparty Clearing houses (CCPs). This model aims to capture the features of: gap risk; feedback between clearing member default, market…

Motivated by the interplay between structural and reduced form credit models, we propose to model the firm value process as a time-changed Brownian motion that may include jumps and stochastic volatility effects, and to study the first…

This review paper provides an introduction of Markov chains and their convergence rates which is an important and interesting mathematical topic which also has important applications for very widely used Markov chain Monte Carlo (MCMC)…