Related papers: A Simple Factoring Pricing Model
We discuss the pricing methodology for Bonus Certificates and Barrier Reverse-Convertible Structured Products. Pricing for a European barrier condition is straightforward for products of both types and depends on an efficient interpolation…
We study the number of factorizations of a positive integer, where the parts of the factorization are of l different colors (or kinds). Recursive or explicit formulas are derived for the case of unordered and ordered, distinct and…
This study deals with the pricing and hedging of single-tranche collateralized debt obligations (STCDOs). We specify an affine two-factor model in which a catastrophic risk component is incorporated. Apart from being analytically tractable,…
In mechanism design it is typical to impose incentive compatibility and then derive an optimal mechanism subject to this constraint. By replacing the incentive compatibility requirement with the goal of minimizing expected ex post regret,…
Nonnegative matrix factorization (NMF) is a popular dimension reduction technique that produces interpretable decomposition of the data into parts. However, this decompostion is not generally identifiable (even up to permutation and…
We propose a unifying framework for the pricing of debt securities under general time-inhomogeneous short-rate diffusion processes. The pricing of bonds, bond options, callable/putable bonds, and convertible bonds (CBs) is covered. Using…
This paper introduces a new semi-parametric approach to the pricing and risk management of bespoke CDO tranches, with a particular attention to bespokes that need to be mapped onto more than one reference portfolio. The only user input in…
We consider the pricing and hedging of counterparty credit risk and funding when there is no possibility to hedge the jump to default of either the bank or the counterparty. This represents the situation which is most often encountered in…
We consider two variables that are related to each other by an invertible function. While it has previously been shown that the dependence structure of the noise can provide hints to determine which of the two variables is the cause, we…
We propose an efficient method to evaluate callable and putable bonds under a wide class of interest rate models, including the popular short rate diffusion models, as well as their time changed versions with jumps. The method is based on…
This article introduces a new mathematical concept of illiquidity that goes hand in hand with credit risk. The concept is not volume- but constraint-based, i.e., certain assets cannot be shorted and are ineligible as num\'eraire. If those…
We propose a new non-linear single-factor asset pricing model $r_{it}=h(f_{t}\lambda_{i})+\epsilon_{it}$. Despite its parsimony, this model represents exactly any non-linear model with an arbitrary number of factors and loadings -- a…
In the aftermath of the global financial crisis, much attention has been paid to investigating the appropriateness of the current practice of default risk modeling in banking, finance and insurance industries. A recent empirical study by…
Matrix factorization is a widely used approach for top-N recommendation and collaborative filtering. When implemented on implicit feedback data (such as clicks), a common heuristic is to upweight the observed interactions. This strategy has…
In this paper, we investigate the extent to which features derived from bank statements provided by loan applicants, and which are not declared on an application form, can enhance a credit scoring model for a New Zealand lending company.…
Commonly used methods of production function and markup estimation assume that a firm's output quantity can be observed as data, but typical datasets contain only revenue, not output quantity. We examine the nonparametric identification of…
In this paper we study the pricing and hedging of nonreplicable contingent claims, such as long-term insurance contracts like variable annuities. Our approach is based on the benchmark-neutral pricing framework of Platen (2024), which…
We compare two different bilateral counterparty valuation adjustment (BVA) formulas. The first formula is an approximation and is based on subtracting the two unilateral Credit Valuation Adjustment (CVA)'s formulas as seen from the two…
In this paper we propose a copula contagion mixture model for correlated default times. The model includes the well known factor, copula, and contagion models as its special cases. The key advantage of such a model is that we can study the…
A simple Ising spin model which can describe the mechanism of price formation in financial markets is proposed. In contrast to other agent-based models, the influence does not flow inward from the surrounding neighbors to the center site,…