Related papers: Mortgage Contracts and Underwater Default

This paper studies a type of consumption preference where some adjustment costs are incured whenever the past spending maximum and the past spending minimum records are updated. This preference can capture the adverse effects of the…

Leasing is a popular channel to market new cars. Pricing a leasing contract is complicated because the leasing rate embodies an expectation of the residual value of the car after contract expiration. To aid lessors in their pricing…

We study convexity and monotonicity properties of option prices in a model with jumps using the fact that these prices satisfy certain parabolic integro-differential equations. Conditions are provided under which preservation of convexity…

We study the gain of an insider having private information which concerns the default risk of a counterparty. More precisely, the default time \tau is modelled as the first time a stochastic process hits a random barrier L. The insider…

The authors examine the concept of probability of default for asset-backed loans. In contrast to unsecured loans it is shown that probability of default can be defined as either a measure of the likelihood of the borrower failing to make…

This paper deals with a high-order accurate implicit finite-difference approach to the pricing of barrier options. In this way various types of barrier options are priced, including barrier options paying rebates, and options on…

Contract theory typically assumes full commitment by the principal, but many contracts fix some payoff-relevant decisions while leaving others discretionary. We ask when imperfect commitment is equivalent to full commitment. For contracts…

American options are financial instruments that can be exercised at any time before expiration. In this paper we study the problem of pricing this kind of derivatives within a framework in which some of the properties --volatility and…

Recent studies on fairness in automated decision making systems have both investigated the potential future impact of these decisions on the population at large, and emphasized that imposing ''typical'' fairness constraints such as…

Credit Value Adjustment (CVA) is the difference between the value of the default-free and credit-risky derivative portfolio, which can be regarded as the cost of the credit hedge. Default probabilities are therefore needed, as input…

We derive closed-form solutions to the optimal stopping problems related to the pricing of perpetual American standard and lookback put and call options in the extensions of the Black-Merton-Scholes model with progressively enlarged…

In this paper we consider a reduced-form intensity-based credit risk model with a hidden Markov state process. A filtering method is proposed for extracting the underlying state given the observation processes. The method may be applied to…

We consider derivatives written on multiple underlyings in a one-period financial market, and we are interested in the computation of model-free upper and lower bounds for their arbitrage-free prices. We work in a completely realistic…

For incomplete preference relations that are represented by multiple priors and/or multiple -- possibly multivariate -- utility functions, we define a certainty equivalent as well as the utility buy and sell prices and indifference price…

We investigate the problem of pricing and hedging derivatives of Electricity Futures contract when the underlying asset is not available. We propose to use a cross hedging strategy based on the Futures contract covering the larger delivery…

I analyze long-term contracting in insurance markets with asymmetric information. The buyer privately observes her risk type, which evolves stochastically over time. A long-term contract specifies a menu of insurance policies, contingent on…

Interbank contagion can theoretically exacerbate losses in a financial system and lead to additional cascade defaults during downturn. In this paper we produce default analysis using both regression and neural network models to verify…

This paper considers mutual obligations in the interconnected bank system and analyzes their influence on joint and marginal survival probabilities as well as CDS and FTD prices for the individual banks. To make the role of mutual…

This paper examines how homestead policies, which opened vast frontier lands for settlement, influenced the development of American frontier states. It uses a treatment propensity-weighted matrix completion model to estimate the…

Networked-guarantee loans may cause the systemic risk related concern of the government and banks in China. The prediction of default of enterprise loans is a typical extremely imbalanced prediction problem, and the networked-guarantee make…