Related papers: Pricing Corporate Defaultable Bond using Declared …
We investigate the impact of available information on the estimation of the default probability within a generalized structural model for credit risk. The traditional structural model where default is triggered when the value of the firm's…
This paper develops a deep learning-based framework for pricing convertible bonds with path-dependent contractual features, namely downward conversion price reset and issuer call clauses under rolling-window trigger rules, which are…
Conditions of Stability for explicit finite difference scheme and some results of numerical analysis for a unified 2 factor model of structural and reduced form types for corporate bonds with fixed discrete coupon are provided. It seems to…
In a simplified setting, we show how to price invoice non-recourse factoring taking into account not only the credit worthiness of the debtor but also the assignor's one, together with the default correlation between the two. Indeed, the…
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…
In this work, a pricing model for a defaultable corporate bond with credit rating migration risk is established. The model turns out to be a free boundary problem with two free boundaries. The latter are the level sets of the solution but…
In this paper, we propose an alternative valuation approach for CAT bonds where a pricing formula is learned by deep neural networks. Once trained, these networks can be used to price CAT bonds as a function of inputs that reflect both the…
Transition risk can be defined as the business-risk related to the enactment of green policies, aimed at driving the society towards a sustainable and low-carbon economy. In particular, the value of certain firms' assets can be lower…
In this paper we present a novel approach for firm default probability estimation. The methodology is based on multivariate contingent claim analysis and pair copula constructions. For each considered firm, balance sheet data are used to…
In this paper, we introduce a model that adds a non-linearity to discounting: the discounting factor may depend on the notional (i.e., discounted values are no longer linear in the notional). In the first part of the paper, we provide a…
Default risk significantly affects the corporate policies of a firm. We develop a model in which a limited liability entity subject to Poisson default shock jointly sets its dividend policy and capital structure to maximize the expected…
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…
Risk-averse investors often wish to exclude stocks from their portfolios that bear high credit risk, which is a measure of a firm's likelihood of bankruptcy. This risk is commonly estimated by constructing signals from quarterly accounting…
We find approximate solutions of partial integro-differential equations, which arise in financial models when defaultable assets are described by general scalar L\'evy-type stochastic processes. We derive rigorous error bounds for the…
We discuss the pricing of defaultable assets in an incomplete information model where the default time is given by a first hitting time of an unobservable process. We show that in a fairly general Markov setting, the indicator function of…
We consider a structural model where the survival/default state is observed together with a noisy version of the firm value process. This assumption makes the model more realistic than most of the existing alternatives, but triggers…
In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims…
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…
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…
We compare observed corporate cumulative default probabilities to those calculated using a stochastic model based on an extension of the work of Black and Cox and find that corporations default as if via diffusive dynamics. The model, based…