Related papers: Pricing sovereign contingent convertible debt
In this article, we analyze two modeling approaches for the pricing of derivative contracts on a commodity index. The first one is a microscopic approach, where the components of the index are modeled individually, and the index price is…
We study emergent dynamics of the discrete Cucker-Smale (in short, DCS) model with randomly switching network topologies. For this, we provide a sufficient framework leading to the stochastic flocking with probability one. Our sufficient…
This paper studies pricing derivatives in an age-dependent semi-Markov modulated market. We consider a financial market where the asset price dynamics follow a regime switching geometric Brownian motion model in which the coefficients…
Sequential Monte Carlo (SMC) methods have successfully been used in many applications in engineering, statistics and physics. However, these are seldom used in financial option pricing literature and practice. This paper presents SMC method…
The present paper provides a multi-period contagion model in the credit risk field. Our model is an extension of Davis and Lo's infectious default model. We consider an economy of n firms which may default directly or may be infected by…
The LIBOR rate is currently scheduled for discontinuation, and the replacement advocated by regulators in the US is the Secured Overnight Financing Rate (SOFR). The change has the potential to disrupt the $200 trillion market of derivatives…
The modeling of the probability of joint default or total number of defaults among the firms is one of the crucial problems to mitigate the credit risk since the default correlations significantly affect the portfolio loss distribution and…
This paper considers the case of pricing discretely-sampled variance swaps under the class of equity-interest rate hybridization. Our modeling framework consists of the equity which follows the dynamics of the Heston stochastic volatility…
This paper presents a novel approach to pricing American options using piecewise diffusion Markov processes (PDifMPs), a type of generalised stochastic hybrid system that integrates continuous dynamics with discrete jump processes. Standard…
We introduce a new volatility model for option pricing that combines Markov switching with the Realized GARCH framework. This leads to a novel pricing kernel with a state-dependent variance risk premium and a pricing formula for European…
In this paper we propose a general derivative pricing framework which employs decoupled time-changed (DTC) L\'evy processes to model the underlying asset of contingent claims. A DTC L\'evy process is a generalized time-changed L\'evy…
As corporates and governments become more digital, they become vulnerable to various forms of cyber attack. Cyber insurance products have been used as risk management tools, yet their pricing does not reflect actual risk, including that of…
We consider the pricing of European-style structured credit payoff in a static framework, where the underlying default times are independent given a common factor. A practical application would consist of the pricing of nth-to-default…
In this paper we introduce a class of information-based models for the pricing of fixed-income securities. We consider a set of continuous- time information processes that describe the flow of information about market factors in a monetary…
There are many studies on development of models for analyzing some derivatives such as credit default swaps .
We review different approaches for measuring the impact of liquidity on CDS prices. We start with reduced form models incorporating liquidity as an additional discount rate. We review Chen, Fabozzi and Sverdlove (2008) and Buhler and Trapp…
Although the growth of share-based payments with performance conditions (hereafter, SPPC) is prominent today, the theoretical price of SPPC has not been sufficiently studied. Reflecting such a situation, the current accounting standards for…
We prove that the variance swap rate (fair strike) equals the price of a co-terminal European-style contract when the underlying is an exponential Markov process, time-changed by an arbitrary continuous stochastic clock, which has arbitrary…
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 consider a financial market in which the short rate is modeled by a continuous time Markov chain (CTMC) with a finite state space. In this setting, we show how to price any financial derivative whose payoff is a function of the state of…