Related papers: Tax Bond Creation Using a Structural Model and its…
Pricing formulae for defaultable corporate bonds with discrete coupons under consideration of the government taxes in the united model of structural and reduced form models are provided. The aim of this paper is to generalize the…
After the beginning of the credit and liquidity crisis, financial institutions have been considering creating a convertible-bond type contract focusing on Capital. Under the terms of this contract, a bond is converted into equity if the…
In this article we show how to analyze the covariation of bond prices nonparametrically and robustly, staying consistent with a general no-arbitrage setting. This is, in particular, motivated by the problem of identifying the number of…
The proposed model is aimed to reveal important patterns in the behavior of a simplified financial system. The patterns could be detected as regular cycles consisting of debt bubbles and crises. Financial cycles have a well defined…
This paper develops a two-dimensional structural framework for valuing credit default swaps and corporate bonds in the presence of default contagion. Modelling the values of related firms as correlated geometric Brownian motions with…
A pricing formula for discount bonds, based on the consideration of the market perception of future liquidity risk, is established. An information-based model for liquidity is then introduced, which is used to obtain an expression for the…
Technical debt is a metaphor used to convey the idea that doing things in a "quick and dirty" way when designing and constructing a software leads to a situation where one incurs more and more deferred future expenses. Similarly to…
A negative basis trade enters a long bond position and buys protection on the issuer of the bond through credit default swap (CDS), aiming at arbitrage profit due to the bond-CDS basis. To classic reduced form model theorists, the existence…
Motivated by the recent studies on the green bond market, we build a model in which an investor trades on a portfolio of green and conventional bonds, both issued by the same governmental entity. The government provides incentives to the…
We study convexity and monotonicity properties for prices of bonds and bond options when the short rate is modeled by a diffusion process. We provide conditions under which convexity of the price in the short rate is guaranteed. Under these…
A complete description of taxation systems that ensure sustainable economic development is given. These tax systems depend on production technologies and gross output volumes. Explicit formulas for such dependencies are found. In a…
We derive simple return models for several classes of bond portfolios. With only one or two risk factors our models are able to explain most of the return variations in portfolios of fixed rate government bonds, inflation linked government…
We analyze a number of properties obligations have or should have.
Emerging market hard-currency bonds are an asset class of growing importance, and contain exposure to an EM sovereign and the underlying industry. The authors investigate how to model this as a modification of the well-known…
The notion of a credit spread curve is fundamental in fixed income investing, but in practice it is not `given' and needs to be constructed from bond prices either for a particular issuer, or for a sector rating-by-rating. Rather than…
In this paper we present a rigorously motivated pricing equation for derivatives, including general cash collateralization schemes, which is consistent with quoted market bond prices. Traditionally, there have been differences in how…
We propose here to look at how abstract a model of a usable system can be, but still say something useful and interesting, so this paper is an exercise in abstraction and formalisation, with usability-of-design as an example target use. We…
An important issue within the present economic crisis is understanding the dynamics of the public debt of a given country, and how the behavior of average consumers and tax payers in that country affects it. Starting from a model of the…
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…
The link between taxation and justice is a classic debate issue, while also being very relevant at a time of changing environmental factors and conditions of the social and economic system. Technologically speaking, there are three types of…