Related papers: Merton's Default Risk Model for Private Company
We consider a structural default model in an interconnected banking network as in Lipton [International Journal of Theoretical and Applied Finance, 19(6), 2016], with mutual obligations between each pair of banks. We analyse the model…
We study the pricing problem for corporate defaultable bond from the viewpoint of the investors outside the firm that could not exactly know about the information of the firm. We consider the problem for pricing of corporate defaultable…
Over the last decade, dividends have become a standalone asset class instead of a mere side product of an equity investment. We introduce a framework based on polynomial jump-diffusions to jointly price the term structures of dividends and…
We consider the problem of maximizing the discounted utility of dividend payments of an insurance company whose reserves are modeled as a classical Cram\'er-Lundberg risk process. We investigate this optimization problem under the…
We propose dpmm, an open-source library for synthetic data generation with Differentially Private (DP) guarantees. It includes three popular marginal models -- PrivBayes, MST, and AIM -- that achieve superior utility and offer richer…
The two main approaches in credit risk are the structural approach pioneered in Merton (1974) and the reduced-form framework proposed in Jarrow & Turnbull (1995) and in Artzner & Delbaen (1995). The goal of this article is to provide a…
This paper presents an augmented deep factor model that generates latent factors for cross-sectional asset pricing. The conventional security sorting on firm characteristics for constructing long-short factor portfolio weights is nonlinear…
In this paper, we propose the discrete time Compound Beta-Binomial Risk Model with by-claims, delayed by-claims and randomized dividends. We then analyze the Gerber-Shiu function for the cases where the dividend threshold $d=0$ and $d>0$…
In a dual risk model, the premiums are considered as the costs and the claims are regarded as the profits. The surplus can be interpreted as the wealth of a venture capital, whose profits depend on research and development. In most of the…
The paper deals with a generalization of the risk model with stochastic premiums where dividends are paid according to a multi-layer dividend strategy. First of all, we derive piecewise integro-differential equations for the Gerber--Shiu…
The paper studies derivative asset analysis in structural credit risk models where the asset value of the firm is not fully observable. It is shown that in order to compute the price dynamics of traded securities one needs to solve a…
This paper is a contribution to the Proceedings of the Workshop Complexity, Metastability and Nonextensivity held in Erice 20-26 July 2004, to be published by World Scientific. We propose a generalization to Merton's model for evaluating…
Model risk measures consequences of choosing a model in a class of possible alternatives. We find analytical and simulated bounds for payoff functions on classes of plausible alternatives of a given discrete model. We measure the impact of…
In this paper we provide a general solution for the dividend discount model in order to compute the intrinsic value of a common stock that allows for multiple stage growth rates of any predetermined number of periods. A mathematical proof…
An empirical analysis, suggested by optimal Merton dynamics, reveals some unexpected features of asset volumes. These features are connected to traders' belief and risk aversion. This paper proposes a trading strategy model in the optimal…
This paper presents a discrete--time equity derivatives pricing model with default risk in a no--arbitrage framework. Using the equity--credit reduced form approach where default intensity mainly depends on the firm's equity value, we…
Dual risk models are popular for modeling a venture capital or high tech company, for which the running cost is deterministic and the profits arrive stochastically over time. Most of the existing literature on dual risk models concentrated…
We present the qGaussian generalization of the Merton framework, which takes into account slow fluctuations of the volatility of the firms market value of financial assets. The minimal version of the model depends on the Tsallis entropic…
We provide closed-form market equilibrium formula consolidating informational imperfections and investors beliefs. Based on Merton's model, we characterize the equilibrium expected excess returns vector with incomplete information. We then…
In dynamic capital structure models with an investor break-even condition, the firm's Bellman equation may not generate a contraction mapping, so the standard existence and uniqueness conditions do not apply. First, we provide an example…