Related papers: Analytical Pricing of Defaultable Bond with Stocha…
In this work we study the price-hedge issue for general defaultable contracts characterized by the presence of a contingent CSA of switching type. This is a contingent risk mitigation mechanism that allow the counterparties of a defaultable…
Under the International Financial Reporting Standards (IFRS) 9, credit losses ought to be recognised timeously and accurately. This requirement belies a certain degree of dynamicity when estimating the constituent parts of a credit loss…
The standard intensity-based approach for modeling defaults is generalized by making the deterministic term structure of the survival probability stochastic via a common jump process. The survival copula of the vector of default times is…
In the paper [Hainaut, D. and Colwell, D.B., {\rm A structural model for credit risk with switching processes and synchronous jumps}, The European Journal of Finance 22(11) (2016): 1040-1062], the authors exploit a synchronous-jump…
This paper presents a new model for options pricing. The Black-Scholes-Merton (BSM) model plays an important role in financial options pricing. However, the BSM model assumes that the risk-free interest rate, volatility, and equity premium…
We develop a theoretical trading conditioning model subject to price volatility and return information in terms of market psychological behavior, based on analytical transaction volume-price probability wave distributions in which we use…
We consider the supOU stochastic volatility model which is able to exhibit long-range dependence. For this model we give conditions for the discounted stock price to be a martingale, calculate the characteristic function, give a strip where…
We propose a unified structural credit risk model incorporating both insolvency and illiquidity risks, in order to investigate how a firm's default probability depends on the liquidity risk associated with its financing structure. We assume…
We consider the problem of computing the Credit Value Adjustment ({CVA}) of a European option in presence of the Wrong Way Risk ({WWR}) in a default intensity setting. Namely we model the asset price evolution as solution to a linear…
This paper is devoted to the price-storage dynamics in natural gas markets. A novel stochastic path-dependent volatility model is introduced with path-dependence in both price volatility and storage increments. Model calibrations are…
Volatility modelling has become a significant area of research within Financial Mathematics. Wiener process driven stochastic volatility models have become popular due their consistency with theoretical arguments and empirical observations.…
In this paper we analyze the resilience of a network of banks to joint price fluctuations of the external assets in which they have shared exposures, and evaluate the worst-case effects of the possible default contagion. Indeed, when the…
In observational studies, exposures are often continuous rather than binary or discrete. At the same time, sensitivity analysis is an important tool that can help determine the robustness of a causal conclusion to a certain level of…
This article constructs a forward exponential utility in a market with multiple defaultable risks. Using the Jacod-Pham decomposition for random fields, we first characterize forward performance processes in a defaultable market under the…
The paper analyzes the mathematics of the relationship between the default risk and yield-to-maturity of a coupon bond. It is shown that the yield-to-maturity is driven not only by the default probability and recovery rate of the bond but…
This paper studies how international investors' concerns about model misspecification affect sovereign bond spreads. We develop a general equilibrium model of sovereign debt with endogenous default wherein investors fear that the…
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 propose an option approach for pricing bond illiquidity that is reminiscent of the celebrated work of Longstaff (1995) on the non-marketability of some non-dividend-paying shares in IPOs. This approach describes a quite common situation…
The special and important problems of default prediction for municipal bonds are addressed using a combination of text embeddings from a pre-trained transformer network, a fully connected neural network, and synthetic oversampling. The…
Equity default-swaps pay the holder a fixed amount of money when the underlying spot level touches a (far-down) barrier during the life of the instrument. While most pricing models give reasonable results when the barrier lies within the…