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This paper is a contribution to the Proceedings of the Workshop Complexity, Metastability and Nonextensivity held in Erice 20-26 July 2004, to be published by World Scientific. We propose a generalization to Merton's model for evaluating…
A Levy-driven Ornstein-Uhlenbeck process is proposed to model the evolution of the risk-free rate and default intensities for the purpose of evaluating option contracts on a credit index. Time evolution in credit markets is assumed to…
Meta-analysis represents a widely accepted approach for evaluating the accuracy of diagnostic tools in clinical and psychological investigations. This paper investigates the applicability of multinomial tree models recently suggested in the…
Much research in systemic risk is focused on default contagion. While this demands an understanding of valuation, fewer articles specifically deal with the existence, the uniqueness, and the computation of equilibrium prices in structural…
This paper introduces a new combinatorial framework for modeling the growth of binary trees through a discrete evolution process that incorporates a growing rule and an extinction rule. Building upon the theory of increasingly labeled…
To study the depinning transition in the limit of strong disorder, Derrida and Retaux (2014) introduced a discrete-time max-type recursive model. It is believed that for a large class of recursive models, including Derrida and Retaux'…
We introduce the Consensus-Bottleneck Asset Pricing Model (CB-APM), which embeds aggregate analyst consensus as a structural bottleneck, treating professional beliefs as a sufficient statistic for the market's high-dimensional information…
This paper presents comparison results and establishes risk bounds for credit portfolios within classes of Bernoulli mixture models, assuming conditionally independent defaults that are stochastically increasing with a common risk factor.…
We introduce a new class of forward performance processes that are endogenous and predictable with regards to an underlying market information set and, furthermore, are updated at discrete times. We analyze in detail a binomial model whose…
Bond prices are a reflection of extremely complex market interactions and policies, making prediction of future prices difficult. This task becomes even more challenging due to the dearth of relevant information, and accuracy is not the…
Prudent management of insurance investment portfolios requires competent asset pricing of fixed-income assets with time-to-event contingent cash flows, such as consumer asset-backed securities (ABS). Current market pricing techniques for…
The paper studies sub and super-replication price bounds for contingent claims defined on general trajectory based market models. No prior probabilistic or topological assumptions are placed on the trajectory space, trading is assumed to…
Since exchange economy considerably varies in the market assets, asset prices have become an attractive research area for investigating and modeling ambiguous and uncertain information in today markets. This paper proposes a new generative…
This paper considers general term structure models like the ones appearing in portfolio credit risk modelling or life insurance. We give a general model starting from families of forward rates driven by infinitely many Brownian motions and…
The additive process generalizes the L\'evy process by relaxing its assumption of time-homogeneous increments and hence covers a larger family of stochastic processes. Recent research in option pricing shows that modeling the underlying log…
A hierarchical Bayesian framework is introduced for developing tree-based mixture models for time series, partly motivated by applications in finance and forecasting. At the top level, meaningful discrete states are identified as…
An efficient method to price bonds with optional sinking feature is presented. Such instruments equip their issuer with the option (but not the obligation) to redeem parts of the notional prior to maturity, therefore the future cash flows…
This paper explores the capabilities of the Constant Elasticity of Variance model driven by a mixed-fractional Brownian motion (mfCEV) [Axel A. Araneda. The fractional and mixed-fractional CEV model. Journal of Computational and Applied…
Continuous time financial market models are often motivated as scaling limits of discrete time models. The objective of this paper is to establish such a connection for a robust framework. More specifically, we consider discrete time models…
We develop a new Bayesian modelling framework for the class of higher-order, variable-memory Markov chains, and introduce an associated collection of methodological tools for exact inference with discrete time series. We show that a version…