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The integration and innovation of finance and technology have gradually transformed the financial system into a complex one. Analyses of the causesd of abnormal fluctuations in the financial market to extract early warning indicators…
Modern evolvements of the technologies have been leading to a profound influence on the financial market. The introduction of constituents like Exchange-Traded Funds, and the wide-use of advanced technologies such as algorithmic trading,…
This paper studies the valuation of a class of default swaps with the embedded option to switch to a different premium and notional principal anytime prior to a credit event. These are early exercisable contracts that give the protection…
There are many studies on development of models for analyzing some derivatives such as credit default swaps .
This paper considers the problem of measuring the credit risk in portfolios of loans, bonds, and other instruments subject to possible default under multi-factor models. Due to the amount of the portfolio, the heterogeneous effect of…
This article presents a generic framework for modeling the dynamics of forward curves in commodity market as commodity derivatives are typically traded by futures or forwards. We have theoretically demonstrated that commodity prices are…
Financial markets of emerging economies are vulnerable to extreme and cascading information spillovers, surges, sudden stops and reversals. With this in mind, we develop a new online early warning system (EWS) to detect what is referred to…
This paper proposes Expected Confidence Dependency (ECD), a novel, soft computing-oriented, accuracy driven dependency measure for feature selection within the rough set theory framework. Unlike traditional rough set dependency measures…
In the present paper we fill an essential gap in the Convertible Bonds pricing world by deriving a Binary Tree based model for valuation subject to credit risk. This model belongs to the framework known as Equity to Credit Risk. We show…
In this paper we show how to hedge a zero coupon bond with a smaller amount of initial capital than required by the classical risk neutral paradigm, whose (trivial) hedging strategy does not suggest to invest in the risky assets. Long dated…
We study capital requirements for bounded financial positions defined as the minimum amount of capital to invest in a chosen eligible asset targeting a pre-specified acceptability test. We allow for general acceptance sets and general…
A class of heterogeneous agent models is investigated where investors switch trading position whenever their motivation to do so exceeds some critical threshold. These motivations can be psychological in nature or reflect behaviour…
The balancing market in the energy sector plays a critical role in physically and financially balancing the supply and demand. Modeling dynamics in the balancing market can provide valuable insights and prognosis for power grid stability…
This paper studies how shocks to global banks' net worth transmit to Emerging Market Economies. Using the identification strategy of Ottonello and Song (2022), which isolates high-frequency surprises to banks' credit supply capacity, we…
The present paper introduces a structural framework to model dependent defaults, with a particular interest in their contagion.
This paper examines the degree of integration at euro area financial markets. To that end, we estimate overall and country-specific integration indices based on a panel vector-autoregression with factor stochastic volatility. Our results…
Networks are ubiquitous in economic research on organizations, trade, and many other areas. However, while economic theory extensively considers networks, no general framework for their empirical modeling has yet emerged. We thus introduce…
We give a collection of explicit sufficient conditions for the true martingale property of a wide class of exponentials of semimartingales. We express the conditions in terms of semimartingale characteristics. This turns out to be very…
We introduce a new model for pricing corporate bonds, which is a modification of the classical model of Merton. In this new model, we drop the liquidity assumption of the firm's asset value process, and assume that there is a liquidly…
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…