Related papers: Priced risk in corporate bonds

In this note, we develop stock option price approximations for a model which takes both the risk o default and the stochastic volatility into account. We also let the intensity of defaults be influenced by the volatility. We show that it…

We propose a new class of extreme-value copulas which are extreme-value limits of conditional normal models. Conditional normal models are generalizations of conditional independence models, where the dependence among observed variables is…

In the paper we study dynamics of the arbitrage prices of credit default swaps within a hazard process model of credit risk. We derive these dynamics without postulating that the immersion property is satisfied between some relevant…

Factor models have become a common and valued tool for understanding the risks associated with an investing strategy. In this report we describe Exabel's factor model, we quantify the fraction of the variability of the returns explained by…

Faced with increasingly severe environmental problems, carbon trading markets and related financial activities aiming at limiting carbon dioxide emissions are booming. Considering the complexity and urgency of carbon market, it is necessary…

Estimating and assessing the risk of a large portfolio is an important topic in financial econometrics and risk management. The risk is often estimated by a substitution of a good estimator of the volatility matrix. However, the accuracy of…

We introduce a class of dependence structures, that we call the Multiple Risk Factor (MRF) dependence structures. On the one hand, the new constructions extend the popular CreditRisk+ approach, and as such they formally describe default…

We study how the climate transition through a low-carbon economy, implemented by carbon pricing, propagates in a credit portfolio and precisely describe how carbon price dynamics affects credit risk measures such as probability of default,…

This article describes and explores taxes and debt in finance. Here a situation is thought about, where tax payments would qualify to be considered as debt. Using this principle we can infer that it is possible to create and price a type of…

We construct a continuous time model for price-mediated contagion precipitated by a common exogenous stress to the banking book of all firms in the financial system. In this setting, firms are constrained so as to satisfy a risk-weight…

Credit risk in the China's bond market has become increasingly evident, creating a progressively escalating risk of default for credit bond investors. Given the current incomplete and inaccurate bond information disclosure, timely tracking…

Systematic and multifactor risk models are revisited via methods which were already successfully developed in signal processing and in automatic control. The results, which bypass the usual criticisms on those risk modeling, are illustrated…

Searching for new effective risk factors on stock returns is an important research topic in asset pricing. Factor modeling is an active research topic in statistics and econometrics, with many new advances. However, these new methods have…

The recent financial crisis has led to so-called multi-curve models for the term structure. Here we study a multi-curve extension of short rate models where, in addition to the short rate itself, we introduce short rate spreads. In…

We address challenges in variable selection with highly correlated data that are frequently present in finance, economics, but also in complex natural systems as e.g. weather. We develop a robustified version of the knockoff framework,…

The implicit government guarantee hampers the recognition and management of risks by all stakeholders in the bond market, and it has led to excessive debt for local governments or state-owned enterprises. To prevent the risk of local…

Borrowing constraints are a key component of modern international macroeconomic models. The analysis of Emerging Markets (EM) economies generally assumes collateral borrowing constraints, i.e., firms access to debt is constrained by the…

We explore the possibilities of importance sampling in the Monte Carlo pricing of a structured credit derivative referred to as Collateralized Debt Obligation (CDO). Modeling a CDO contract is challenging, since it depends on a pool of…

We detect the parameter sensitivities of bond pricing which is driven by a Brownian motion and a compound Poisson process as the discontinuous case in credit risk research. The strict mathematical deductions are given theoretically due to…

This paper develops a deep learning-based framework for pricing convertible bonds with path-dependent contractual features, namely downward conversion price reset and issuer call clauses under rolling-window trigger rules, which are…