Related papers: Credit Spreads' Term Structure: Stochastic Modelin…
The classical reduced-form and filtration expansion framework in credit risk is extended to the case of multiple, non-ordered defaults, assuming that conditional densities of the default times exist. Intensities and pricing formulas are…
We consider a structural credit model for a large portfolio of credit risky assets where the correlation is due to a market factor. By considering the large portfolio limit of this system we show the existence of a density process for the…
This paper describes a flexible and tractable bottom-up dynamic correlation modelling framework with a consistent stochastic recovery specification. The stochastic recovery specification only models the first two moments of the spot…
According to theoretical models of valuing risky corporate securities, risk of default is primary component in overall yield spread. However, sizable empirical literature considers it otherwise by giving more importance to non-default risk…
The intensity of a default time is obtained by assuming that the default indicator process has an absolutely continuous compensator. Here we drop the assumption of absolute continuity with respect to the Lebesgue measure and only assume…
In the second part of our series we suggest new definitions of credit bond duration and convexity that remain consistent across all levels of credit quality including deeply distressed bonds and introduce additional risk measures that are…
We present an novel framework for efficiently and effectively extending the powerful continuous diffusion processes to discrete modeling. Previous approaches have suffered from the discrepancy between discrete data and continuous modeling.…
Risk-averse investors often wish to exclude stocks from their portfolios that bear high credit risk, which is a measure of a firm's likelihood of bankruptcy. This risk is commonly estimated by constructing signals from quarterly accounting…
In this paper incomplete-information models are developed for the pricing of securities in a stochastic interest rate setting. In particular we consider credit-risky assets that may include random recovery upon default. The market…
Building on recent advances in scientific machine learning and generative modeling for computational fluid dynamics, we propose a conditional score-based diffusion model designed for multi-scenarios fluid flow prediction. Our model…
This paper considers general term structure models like the ones appearing in portfolio credit risk modelling or life insurance. We give a general model starting from families of forward rates driven by infinitely many Brownian motions and…
In this paper, we consider a generic interest rate market in the presence of roll-over risk, which generates spreads in spot/forward term rates. We do not require classical absence of arbitrage and rely instead on a minimal market viability…
This paper studies a novel approach for approximating the behavior of compartmental spreading processes. In contrast to prior work, the methods developed describe a dynamics which bound the exact moment dynamics, without explicitly…
Modelling the transmission dynamics of an infectious disease is a complex task. Not only it is difficult to accurately model the inherent non-stationarity and heterogeneity of transmission, but it is nearly impossible to describe,…
We propose a model which can be jointly calibrated to the corporate bond term structure and equity option volatility surface of the same company. Our purpose is to obtain explicit bond and equity option pricing formulas that can be…
Credit risk default prediction remains a cornerstone of risk management in the financial industry. The task involves estimating the likelihood that a borrower will fail to meet debt obligations, an objective critical for lending decisions,…
We compare observed corporate cumulative default probabilities to those calculated using a stochastic model based on an extension of the work of Black and Cox and find that corporations default as if via diffusive dynamics. The model, based…
There are many studies on development of models for analyzing some derivatives such as credit default swaps .
Credit risk assessment is a crucial aspect of financial decision-making, enabling institutions to predict the likelihood of default and make informed lending decisions. Two prominent methodologies in credit risk modeling are logistic…
Diffusion in a linear potential in the presence of position-dependent killing is used to mimic a default process. Different assumptions regarding transport coefficients, initial conditions, and elasticity of the killing measure lead to…