Related papers: Analytical Pricing of Defaultable Bond with Stocha…
We develop a finite horizon continuous time market model, where risk averse investors maximize utility from terminal wealth by dynamically investing in a risk-free money market account, a stock written on a default-free dividend process,…
In this paper, using the structural approach is derived a mathematical model of the discrete coupon bond with the provision that allow the holder to demand early redemption at any coupon dates prior to the maturity and based on this model…
This paper extends an option-theoretic approach to estimate liquidity spreads for corporate bonds. Inspired by Longstaff's equity market framework and subsequent work by Koziol and Sauerbier on risk-free zero-coupon bonds, the model views…
We propose a new financial model, the stochastic volatility model with sticky drawdown and drawup processes (SVSDU model), which enables us to capture the features of winning and losing streaks that are common across financial markets but…
We consider a structural default model in an interconnected banking network as in Lipton [International Journal of Theoretical and Applied Finance, 19(6), 2016], with mutual obligations between each pair of banks. We analyse the model…
We introduce a class of short-rate models that exhibit a ``higher for longer'' phenomenon. Specifically, the short-rate is modeled as a general time-homogeneous one-factor Markov diffusion on a finite interval. The lower endpoint is assumed…
We present a new model for credit index derivatives, in the top-down approach. This model has a dynamic loss intensity process with volatility and jumps and can include counterparty risk. It handles CDS, CDO tranches, Nth-to-default and…
This paper describes a flexible and tractable bottom-up dynamic correlation modelling framework with a consistent stochastic recovery specification. The stochastic recovery specification only models the first two moments of the spot…
According to theoretical models of valuing risky corporate securities, risk of default is primary component in overall yield spread. However, sizable empirical literature considers it otherwise by giving more importance to non-default risk…
We build a general model for pricing defaultable claims. In addition to the usual absence of arbitrage assumption, we assume that one defaultable asset (at least) looses value when the default occurs. We prove that under this assumption, in…
This paper presents a discrete--time equity derivatives pricing model with default risk in a no--arbitrage framework. Using the equity--credit reduced form approach where default intensity mainly depends on the firm's equity value, we…
We propose two structural models for stochastic losses given default which allow to model the credit losses of a portfolio of defaultable financial instruments. The credit losses are integrated into a structural model of default events…
A direct method for calculating default rates by industry and target corporate segments is not possible given the lack of statistical data. The proposed paper considers a model for filtering the dynamics of the probability of default of…
Credit Valuation Adjustment is a balance sheet item which is nowadays subject to active risk management by specialized traders. However, one of the most important risk factors, which is the vector of default intensities of the counterparty,…
We study the properties of nonlinear Backward Stochastic Differential Equations (BSDEs) driven by a Brownian motion and a martingale measure associated with a default jump with intensity process $(\lambda_t)$. We give a priori estimates for…
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 consider the pricing of derivatives written on accumulated marks, such as weather derivatives or aggregate loss claims, using a self-exciting marked point process. The jump intensity mean-reverts between events and increases at jump…
We propose a general framework for the simultaneous modeling of equity, government bonds, corporate bonds and derivatives. Uncertainty is generated by a general affine Markov process. The setting allows for stochastic volatility, jumps, the…
A multi-dimensional extension of the structural default model with firms' values driven by diffusion processes with Marshall-Olkin-inspired correlation structure is presented. Semi-analytical methods for solving the forward calibration…
In this paper, we study the option pricing problems for rough volatility models. As the framework is non-Markovian, the value function for a European option is not deterministic; rather, it is random and satisfies a backward stochastic…