Related papers: On the range of admissible term-structures

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…

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…

We consider a market with a term structure of credit risky bonds in the single-name case. We aim at minimal assumptions extending existing results in this direction: first, the random field of forward rates is driven by a general…

In credit risk literature, the existence of an equivalent martingale measure is stipulated as one of the main assumptions in the hazard process model. Here we show by construction the existence of a measure that turns the discounted stock…

We propose a model for the credit markets in which the random default times of bonds are assumed to be given as functions of one or more independent "market factors". Market participants are assumed to have partial information about each of…

We consider the theory of bond discounts, defined as the difference between the terminal payoff of the contract and its current price. Working in the setting of finite-dimensional realizations in the HJM framework, under suitable notions of…

We provide a framework for obtaining error bounds for linear conic problems without assuming constraint qualifications or regularity conditions. The key aspects of our approach are the notions of amenable cones and facial residual…

Over the last decade, dividends have become a standalone asset class instead of a mere side product of an equity investment. We introduce a framework based on polynomial jump-diffusions to jointly price the term structures of dividends and…

Risk-neutral default probabilities can be implied from credit default swap (CDS) market quotes. In practice, mid CDS quotes are used as inputs, as their risk-neutral counterparts are not observable. We show how to imply risk-neutral default…

We develop an arbitrage-free deep learning framework for yield curve and bond price forecasting based on the Heath-Jarrow-Morton (HJM) term-structure model and a dynamic Nelson-Siegel parameterization of forward rates. Our approach embeds a…

We present a family of models for the term structure of interest rates which describe the interest rate curve as a stochastic process in a Hilbert space. We start by decomposing the deformations of the term structure into the variations of…

The hypothesis that committed revolving credit lines with fixed spreads can provide firms with interest rate insurance is a standard feature of models on these credit facilities' interest rate structure. Nevertheless, this hypothesis has…

This paper considers mutual obligations in the interconnected bank system and analyzes their influence on joint and marginal survival probabilities as well as CDS and FTD prices for the individual banks. To make the role of mutual…

We explore credit risk pricing by modeling equity as a call option and debt as the difference between the firm's asset value and a put option, following the structural framework of the Merton model. Our approach proceeds in two stages:…

Absence-of-Arbitrage (AoA) is the basic assumption underpinning derivatives pricing theory. As part of the OTC derivatives market, the CDS market not only provides a vehicle for participants to hedge and speculate on the default risks of…

Fixed income markets share many features with the equity markets. However there are significant differences as well and many attempts have been done in the past to develop specific tools which describe (and possibly forecasts) the behavior…

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 provide a full classification of all attainable term structure shapes in the two-factor Vasicek model of interest rates. In particular, we show that the shapes normal, inverse, humped, dipped and hump-dip are always attainable. In…

We study the term structure equation for single-factor models that predict nonnegative short rates. In particular, we show that the price of a bond or a bond option is the unique classical solution to a parabolic differential equation with…

We present a class of flexible and tractable static factor models for the term structure of joint default probabilities, the factor copula models. These high-dimensional models remain parsimonious with pair-copula constructions, and nest…