Related papers: Defaultable bond liquidity spread estimation: an o…
We investigate the impact of available information on the estimation of the default probability within a generalized structural model for credit risk. The traditional structural model where default is triggered when the value of the firm's…
We derive an explicit asymptotic approximation for the implied volatilities of Call options written on bonds assuming the short-rate is described by an affine short-rate model. For specific affine short-rate models, we perform numerical…
In this paper we study the pricing and hedging problem of a portfolio of life insurance products under the benchmark approach, where the reference market is modelled as driven by a state variable following a polynomial diffusion on a…
We consider a two-factor model for the valuation of a non callable defaultable bond which pays coupons at certain given dates. The model under consideration is the Jump to Default Constant Elasticity of Variance (JDCEV) model. The JDCEV…
In this three-part series of papers, we argue that the conventional spread measures are not well defined for credit-risky bonds and introduce a set of credit term structures which correct for the biases associated with the strippable cash…
Life expectancy have been increasing over the past years due to better health care, feeding and conducive environment. To manage future uncertainty related to life expectancy, various insurance institutions have resolved to come up with…
We extend the Vasi\v{c}ek loan portfolio model to a setting where liabilities fluctuate randomly and asset values may be subject to systemic jump risk. We derive the probability distribution of the percentage loss of a uniform portfolio and…
After the beginning of the credit and liquidity crisis, financial institutions have been considering creating a convertible-bond type contract focusing on Capital. Under the terms of this contract, a bond is converted into equity if the…
This paper presents a convenient framework for modeling default process and pricing derivative securities involving credit risk. The framework provides an integrated view of credit valuation adjustment by linking distance-to-default,…
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 price and replicate a variety of claims written on the log price $X$ and quadratic variation $[X]$ of a risky asset, modeled as a positive semimartingale, subject to stochastic volatility and jumps. The pricing and hedging formulas do…
This paper describes a general approach for stochastic modeling of assets returns and liability cash-flows of a typical pensions insurer. On the asset side, we model the investment returns on equities and various classes of fixed-income…
This paper presents the experimental process and results of SVM, Gradient Boosting, and an Attention-GRU Hybrid model in predicting the Implied Volatility of rolled-over five-year spread contracts of credit default swaps (CDS) on European…
We introduce a random forest approach to enable spreads' prediction in the primary catastrophe bond market. We investigate whether all information provided to investors in the offering circular prior to a new issuance is equally important…
Interpretability analysis methods for artificial intelligence models, such as LIME and SHAP, are widely used, though they primarily serve as post-model for analyzing model outputs. While it is commonly believed that the transparency and…
This paper performs the numerical analysis and the computation of a Spread option in a market with imperfect liquidity. The number of shares traded in the stock market has a direct impact on the stock's price. Thus, we consider a…
In this paper we compare two classical one-factor diffusion models which are used to model the term structure of interest rates. One of them is based on the Wiener-Bachelier process while the second one is based on the Ornstein-Uhlenbeck…
This paper develops a model of liquidity provision in financial markets by adapting the Madhavan, Richardson, and Roomans (1997) price formation model to realistic order books with quote discretization and liquidity rebates. We postulate…
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 propose an efficient method to evaluate callable and putable bonds under a wide class of interest rate models, including the popular short rate diffusion models, as well as their time changed versions with jumps. The method is based on…