Related papers: Binomial Tree Model for Convertible Bond Pricing w…
Within the context of the banking-related literature on contingent convertible bonds, we comprehensively formalise the design and features of a relatively new type of insurance-linked security, called a contingent convertible catastrophe…
Catastrophe (CAT) bond markets are incomplete and hence carry uncertainty in instrument pricing. As such various pricing approaches have been proposed, but none treat the uncertainty in catastrophe occurrences and interest rates in a…
The theme in this paper is the recombining binomial tree to price American put option when the underlying stock follows constant elasticity of variance(CEV) process. Recombining nodes of binomial tree are decided from finite difference…
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…
Motivated by the Corns-Satchell, continuous time, option pricing model, we develop a binary tree pricing model with underlying asset price dynamics following It\^o-Mckean skew Brownian motion. While the Corns-Satchell market model is…
We construct a binomial tree model fitting all moments to the approximated geometric Brownian motion. Our construction generalizes the classical Cox-Ross-Rubinstein, the Jarrow-Rudd, and the Tian binomial tree models. The new binomial model…
In this article, we study the problem of pricing defaultable bond with discrete default intensity and barrier under constant risk free short rate using higher order binary options and their integrals. In our credit risk model, the risk free…
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…
A heat kernel approach is proposed for the development of a general, flexible, and mathematically tractable asset pricing framework in finite time. The pricing kernel, giving rise to the price system in an incomplete market, is modelled by…
This paper proposes a Monte Carlo technique for pricing the forward yield to maturity, when the volatility of the zero-coupon bond is known. We make the assumption of deterministic default intensity (Hazard Rate Function). We make no…
We introduce a fairly general, recombining trinomial tree model in the natural world. Market-completeness is ensured by considering a market consisting of two risky assets, a riskless asset, and a European option. The two risky assets…
In this paper is proposed a 2 factor structural PDE model of pricing puttable bond with credit risk and derived the analytical pricing formula. To this end, first, a 2 factor structural (PDE) model of pricing zero coupon bond with credit…
The notion of a credit spread curve is fundamental in fixed income investing, but in practice it is not `given' and needs to be constructed from bond prices either for a particular issuer, or for a sector rating-by-rating. Rather than…
In this paper incomplete-information models are developed for the pricing of securities in a stochastic interest rate setting. In particular we consider credit-risky assets that may include random recovery upon default. The market…
This papers addresses the stock option pricing problem in a continuous time market model where there are two stochastic tradable assets, and one of them is selected as a num\'eraire. It is shown that the presence of arbitrarily small…
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 propose an extension of the Cox-Ross-Rubinstein (CRR) model based on $q$-binomial (or Kemp) random walks, with application to default with logistic failure rates. This model allows us to consider time-dependent switching probabilities…
The Constant Elasticity of Variance (CEV) model is mathematically presented and then used in a Credit-Equity hybrid framework. Next, we propose extensions to the CEV model with default: firstly by adding a stochastic volatility diffusion…
We give a comprehensive review of credit term structure modeling methodologies. The conventional approach to modeling credit term structure is summarized and shown to be equivalent to a particular type of the reduced form credit risk model,…
We extend the now classic structural credit modeling approach of Black and Cox to a class of "two-factor" models that unify equity securities such as options written on the stock price, and credit products like bonds and credit default…