Related papers: Priced risk in corporate bonds
This study delves into the temporal dynamics within the equity market through the lens of bond traders. Recognizing that the riskless interest rate fluctuates over time, we leverage the Black-Derman-Toy model to trace its temporal…
In recent years, multi-factor strategies have gained increasing popularity in the financial industry, as they allow investors to have a better understanding of the risk drivers underlying their portfolios. Moreover, such strategies promise…
This article studies the impact of carbon risk on stock pricing. To address this, we consider the seminal approach of G\"orgen \textsl{et al.} (2019), who proposed estimating the carbon financial risk of equities by their carbon beta. To…
In this article, we consider a 2 factors-model for pricing defaultable bond with discrete default intensity and barrier where the 2 factors are stochastic risk free short rate process and firm value process. We assume that the default event…
The valuation process that economic agents undergo for investments with uncertain payoff typically depends on their statistical views on possible future outcomes, their attitudes toward risk, and, of course, the payoff structure itself.…
The credit crisis of 2007 and 2008 has thrown much focus on the models used to price mortgage backed securities. Many institutions have relied heavily on the credit ratings provided by credit agency. The relationships between management of…
Prediction problems in finance go beyond estimating the unknown parameters of a model (e.g. of expected returns). This is because such a model would have to include parameters governing the market participants' propensity to change their…
The collateral choice option gives the collateral posting party the opportunity to switch between different collateral currencies which is well-known to impact the asset price. Quantification of the option's value is of practical importance…
We investigate the effects of the social interactions of a finite set of agents on an equilibrium pricing mechanism. A derivative written on non-tradable underlyings is introduced to the market and priced in an equilibrium framework by…
A heat kernel approach is proposed for the development of a general, flexible, and mathematically tractable asset pricing framework in finite time. The pricing kernel, giving rise to the price system in an incomplete market, is modelled by…
A multivariate quantile regression model with a factor structure is proposed to study data with many responses of interest. The factor structure is allowed to vary with the quantile levels, which makes our framework more flexible than the…
Estimating market impact and transaction costs of large trades (metaorders) is a very important topic in finance. However, using models of price and trade based on public market data provide average price trajectories which are…
We study the power and limitations of posted prices in multi-unit markets, where agents arrive sequentially in an arbitrary order. We prove upper and lower bounds on the largest fraction of the optimal social welfare that can be guaranteed…
This article introduces a new mathematical concept of illiquidity that goes hand in hand with credit risk. The concept is not volume- but constraint-based, i.e., certain assets cannot be shorted and are ineligible as num\'eraire. If those…
Much research in systemic risk is focused on default contagion. While this demands an understanding of valuation, fewer articles specifically deal with the existence, the uniqueness, and the computation of equilibrium prices in structural…
Covered bonds are a specific example of senior secured debt. If the issuer of the bonds defaults the proceeds of the assets in the cover pool are used for their debt service. If in this situation the cover pool proceeds do not suffice for…
While asset-pricing models increasingly recognize that factor risk premia are subject to structural change, existing literature typically assumes that investors correctly account for such instability. This paper studies how investors…
We give a comprehensive review of credit term structure modeling methodologies. The conventional approach to modeling credit term structure is summarized and shown to be equivalent to a particular type of the reduced form credit risk model,…
In this article, we explore a class of tractable interest rate models that have the property that the price of a zero-coupon bond can be expressed as a polynomial of a state diffusion process. Our results include a classification of all…
Given the success and almost universal acceptance of the simple linear regression three-factor model, it is interesting to analyze the informational content of the three factors in explaining stock returns when the analysis is allowed to…