Related papers: Binomial Tree Model for Convertible Bond Pricing w…
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 modification of the classical Black-Derman-Toy (BDT) interest rate tree model, which includes the possibility of a jump with small probability at each step to a practically zero interest rate. The corresponding BDT algorithms…
We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump--diffusion process for the risk factors, i.e. for the company assets. We also include correlations…
We introduce a novel class of credit risk models in which the drift of the survival process of a firm is a linear function of the factors. The prices of defaultable bonds and credit default swaps (CDS) are linear-rational in the factors.…
This paper introduces a credit risk rating model for credit risk assessment in quantitative finance, aiming to categorize borrowers based on their behavioral data. The model is trained on data from Experian, a widely recognized credit…
Paper 1 of this research programme develops a resolution-aware risk-design framework for the simplest event-linked perpetual: a contract whose underlying tracks a single binary prediction-market probability through resolution. The…
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…
Ensemble of regression trees have become popular statistical tools for the estimation of conditional mean given a set of predictors. However, quantile regression trees and their ensembles have not yet garnered much attention despite the…
We study U.S. Treasury yield curve forecasting under distributional uncertainty and recast forecasting as an operations research and managerial decision problem. Rather than minimizing average forecast error, the forecaster selects a…
This paper considers the modelling of collateralized debt obligations (CDOs). We propose a top-down model via forward rates generalizing Filipovi\'c, Overbeck and Schmidt (2009) to the case where the forward rates are driven by a finite…
Technical trading rules and linear regressive models are often used by practitioners to find trends in financial data. However, these models are unsuited to find non-linearly separable patterns. We propose a decision tree forecasting model…
In this paper we introduce a sublinear conditional expectation with respect to a family of possibly nondominated probability measures on a progressively enlarged filtration. In this way, we extend the classic reduced-form setting for credit…
We consider a model in which a trader aims to maximize expected risk-adjusted profit while trading a single security. In our model, each price change is a linear combination of observed factors, impact resulting from the trader's current…
Robust yield curve estimation is crucial in fixed-income markets for accurate instrument pricing, effective risk management, and informed trading strategies. Traditional approaches, including the bootstrapping method and parametric…
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…
Real-valued time series are ubiquitous in the sciences and engineering. In this work, a general, hierarchical Bayesian modelling framework is developed for building mixture models for times series. This development is based, in part, on the…
Tree-based ensemble methods, as Random Forests and Gradient Boosted Trees, have been successfully used for regression in many applications and research studies. Furthermore, these methods have been extended in order to deal with uncertainty…
We present a novel approach to the pricing of financial instruments in emission markets, for example, the EU ETS. The proposed structural model is positioned between existing complex full equilibrium models and pure reduced form models.…
Convertible bonds give rise to the so-called free boundary; i.e., an unknown boundary between continuation and conversion regions of the bond. The characteristic feature of such a bond, with an extra call feature, is that the free boundary…
A general method to construct recombinant tree approximations for stochastic volatility models is developed and applied to the Heston model for stock price dynamics. In this application, the resulting approximation is a four tuple Markov…