Related papers: The Jarrow & Turnbull setting revisited
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…
We propose a novel credit default model that takes into account the impact of macroeconomic information and contagion effect on the defaults of obligors. We use a set-valued Markov chain to model the default process, which is the set of all…
We show how to price and replicate a variety of barrier-style claims written on the $\log$ price $X$ and quadratic variation $\langle X \rangle$ of a risky asset. Our framework assumes no arbitrage, frictionless markets and zero interest…
An efficient method to price bonds with optional sinking feature is presented. Such instruments equip their issuer with the option (but not the obligation) to redeem parts of the notional prior to maturity, therefore the future cash flows…
In this article, we consider a Markov-modulated model with jumps for short rate dynamics. We obtain closed formulas for the term structure and forward rates using the properties of the jump-telegraph process and the expectation hypothesis.…
This paper aims at solving FX market volatility modeling problem and finding the most becoming approach to this task. Validity of two competing approaches, classical econometric generalized conditional heteroscedasticity and mathematical…
We analyze complexity of financial (and general economic) processes by comparing classical and quantum-like models for randomness. Our analysis implies that it might be that a quantum-like probabilistic description is more natural for…
A derivative is a financial security whose value is a function of underlying traded assets and market outcomes. Pricing a financial derivative involves setting up a market model, finding a martingale (``fair game") probability measure for…
In credit risk literature, the existence of an equivalent martingale measure is stipulated as one of the main assumptions in the hazard process model. Here we show by construction the existence of a measure that turns the discounted stock…
We propose a continuous time model for financial markets with proportional transactions costs and a continuum of risky assets. This is motivated by bond markets in which the continuum of assets corresponds to the continuum of possible…
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…
This project attempts to address the problem of asset pricing in a financial market, where the interest rates and volatilities exhibit regime switching. This is an extension of the Black-Scholes model. Studies of Markov-modulated regime…
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…
This study deals with the problem of pricing compound options when the underlying asset follows a mixed fractional Brownian motion with jumps. An analytic formula for compound options is derived under the risk neutral measure. Then, these…
This paper introduces an innovative method for constructing copula models capable of describing arbitrary non-monotone dependence structures. The proposed method enables the creation of such copulas in parametric form, thus allowing the…
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…
This paper considers a variant of the classical Cram\'er-Lundberg model that is particularly appropriate in the credit context, with the distinguishing feature that it corresponds to a finite number of obligors. The focus is on computing…
We present a general framework for the estimation of corporate default based on a firm's capital structure, when its assets are assumed to follow a pure jump L\'evy processes; this setup provides a natural extension to usual default metrics…
The paper reviews origins of the approach to pricing derivatives post-crisis by following three papers that have received wide acceptance from practitioners as the theoretical foundations for it - [Piterbarg 2010], [Burgard and Kjaer 2010]…
We discuss the pricing of defaultable assets in an incomplete information model where the default time is given by a first hitting time of an unobservable process. We show that in a fairly general Markov setting, the indicator function of…