Related papers: Pricing sovereign contingent convertible debt

Stochastic differential equation (SDE) models are the foundation for pricing and hedging financial derivatives. The drift and volatility functions in SDE models are typically chosen to be algebraic functions with a small number (less than…

In this work, we study statistical arbitrage strategies in international crude oil futures markets. We analyse strategies that extend classical pairs trading strategies, considering the two benchmark crude oil futures (Brent and WTI)…

The polling system with switch-over durations is a useful model with several practical applications. It is classified as a Discrete Event Dynamic System (DEDS) for which no one agreed upon modelling approach exists. Furthermore, DEDS are…

With the reform of interest rate benchmarks, interbank offered rates (IBORs) like LIBOR have been replaced by risk-free rates (RFRs), such as the Secured Overnight Financing Rate (SOFR) in the U.S. and the Euro Short-Term Rate (\euro STR)…

Large tick assets, i.e. assets where one tick movement is a significant fraction of the price and bid-ask spread is almost always equal to one tick, display a dynamics in which price changes and spread are strongly coupled. We introduce a…

Corporate defaults may be triggered by some major market news or events such as financial crises or collapses of major banks or financial institutions. With a view to develop a more realistic model for credit risk analysis, we introduce a…

We propose a top-down model for cash CLO. This model can consistently price cash CLO tranches both within the same deal and across different deals. Meaningful risk measures for cash CLO tranches can also be defined and computed. This method…

In this paper, we are concerned with the valuation of Catastrophic Mortality Bonds and, in particular, we examine the case of the Swiss Re Mortality Bond 2003 as a primary example of this class of assets. This bond was the first…

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…

This paper develops a coupled model for day-ahead electricity prices and average daily temperature which allows to model quanto weather and energy derivatives. These products have gained on popularity as they enable to hedge against both…

This paper studies a valuation framework for financial contracts subject to reference and counterparty default risks with collateralization requirement. We propose a fixed point approach to analyze the mark-to-market contract value with…

We revisit the problem of pricing and hedging plain vanilla single-currency interest rate derivatives using multiple distinct yield curves for market coherent estimation of discount factors and forward rates with different underlying rate…

This paper addresses the challenges of pricing exotic options and structured products, which traditional models often fail to handle due to their inability to capture real-world market phenomena like fat-tailed distributions and volatility…

Through a long-period analysis of the inter-temporal relations between the French markets for credit default swaps (CDS), shares and bonds between 2001 and 2008, this article shows how a financial innovation like CDS could heighten…

In this article, we consider a 2 factors-model for pricing defaultable bond with discrete default intensity and barrier where the 2 factors are stochastic risk free short rate process and firm value process. We assume that the default event…

This paper develops a deep learning-based framework for pricing convertible bonds with path-dependent contractual features, namely downward conversion price reset and issuer call clauses under rolling-window trigger rules, which are…

Based on empirical evidence of fast mean-reverting spikes, we model electricity price processes $X+Z^\beta$ as the sum of a continuous It\^o semimartingale $X$ and a a mean-reverting compound Poisson process $Z_t^\beta = \int_0^t…

The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…

We follow a long path for Credit Derivatives and Collateralized Debt Obligations (CDOs) in particular, from the introduction of the Gaussian copula model and the related implied correlations to the introduction of arbitrage-free dynamic…

Most of the empirical studies on stochastic volatility dynamics favor the 3/2 specification over the square-root (CIR) process in the Heston model. In the context of option pricing, the 3/2 stochastic volatility model is reported to be able…