Related papers: Defaultable term structures driven by semimartinga…
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 develops general, discrete, non-probabilistic market models and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of martingale-like properties as well as a…
We propose a semi-structured discrete-time multi-state model to analyse mortgage delinquency transitions. This model combines an easy-to-understand structured additive predictor, which includes linear effects and smooth functions of time…
We study the martingale optimal transport problem with state-dependent trading frictions and develop a geometric and duality framework extending from the one time-step to the multi-marginal setting. Building on the left-monotone structure…
We characterize affine term structure models of non-negative short rate $R$ which may be obtained as solutions of autonomous SDEs driven by independent, one-dimensional L\'evy martingales, that is equations of the form $$…
We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale…
We introduce a mean-field extension of the LIBOR market model (LMM) which preserves the basic features of the original model. Among others, these features are the martingale property, a directly implementable calibration and an economically…
Let $X$ be the unique normal martingale such that $X_0=0$ and \[\mathrm{d}[X]_t=(1-t-X_{t-}) \mathrm{d}X_t+\mathrm{d}t\] and let $Y_t:=X_t+t$ for all $t\geq 0$; the semimartingale $Y$ arises in quantum probability, where it is the…
A standing assumption in the literature on proportional transaction costs is efficient friction. Together with robust no free lunch with vanishing risk, it rules out strategies of infinite variation, as they usually appear in frictionless…
In this paper we are concerned with backward stochastic differential equations with random default time and their applications to default risk. The equations are driven by Brownian motion as well as a mutually independent martingale…
We derive a higher-order asymptotic expansion of the conditional characteristic function of the increment of an It\^o semimartingale over a shrinking time interval. The spot characteristics of the It\^o semimartingale are allowed to have…
We introduce a regularization approach to arbitrage-free factor-model selection. The considered model selection problem seeks to learn the closest arbitrage-free HJM-type model to any prespecified factor-model. An asymptotic solution to…
The scope of this manuscript is to review some recent developments in statistics for discretely observed semimartingales which are motivated by applications for financial markets. Our journey through this area stops to take closer looks at…
We develop a model for credit rating migration that accounts for the impact of economic state fluctuations on default probabilities. The joint process for the economic state and the rating is modelled as a time-homogeneous Markov chain.…
This paper considers the modelling of collateralized debt obligations (CDOs). We propose a top-down model via forward rates generalizing Filipovi\'c, Overbeck and Schmidt (2009) to the case where the forward rates are driven by a finite…
The density hypothesis on random times becomes now a standard in modeling of risks. One of the basic reasons to introduce the density hypothesis is the desire to have a computable credit risk model. However, recent work shows that merely an…
This paper provides robust, new evidence on the causal drivers of market troughs. We demonstrate that conclusions about these triggers are critically sensitive to model specification, moving beyond restrictive linear models with a flexible…
We study the term structure equation for single-factor models that predict nonnegative short rates. In particular, we show that the price of a bond or a bond option is the unique classical solution to a parabolic differential equation with…
In the spirit of Bj\"ork-DiMasi-Kabanov-Runggaldier, we investigate term structure models driven by Wiener process and Poisson measures with forward curve dependent volatilities. This includes a full existence and uniqueness proof for the…
In a general semimartingale financial model, we study the stability of the No Arbitrage of the First Kind (NA1) (or, equivalently, No Unbounded Profit with Bounded Risk) condition under initial and under progressive filtration enlargements.…