Related papers: Pricing defaultable debt: some exact results

This paper develops a two-dimensional structural framework for valuing credit default swaps and corporate bonds in the presence of default contagion. Modelling the values of related firms as correlated geometric Brownian motions with…

We propose a unified framework for equity and credit risk modeling, where the default time is a doubly stochastic random time with intensity driven by an underlying affine factor process. This approach allows for flexible interactions…

The objective of this paper is to provide a comprehensive study no-arbitrage pricing of financial derivatives in the presence of funding costs, the counterparty credit risk and market frictions affecting the trading mechanism, such as…

In this paper, we performs a credit risk analysis, on the data of past loan applicants of a company named Lending Club. The calculation required the use of exploratory data analysis and machine learning classification algorithms, namely,…

Parastatistic distribution of a total debt owed to a large number of creditors considered in relation to the duration of these debts. The process of debt calculation depends on the fractal dimension of economic system in which this process…

One of the risks derived from selling long term policies that any insurance company has, arises from interest rates. In this paper we consider a general class of stochastic volatility models written in forward variance form. We also deal…

We introduce a class of interest rate models, called the $\alpha$-CIR model, which gives a natural extension of the standard CIR model by adopting the $\alpha$-stable L{\'e}vy process and preserving the branching property. This model allows…

This paper considers the case of pricing discretely-sampled variance swaps under the class of equity-interest rate hybridization. Our modeling framework consists of the equity which follows the dynamics of the Heston stochastic volatility…

This paper deals with a high-order accurate implicit finite-difference approach to the pricing of barrier options. In this way various types of barrier options are priced, including barrier options paying rebates, and options on…

We propose a model for the joint evolution of European inflation, the European Central Bank official interest rate and the short-term interest rate, in a stochastic, continuous time setting. We derive the valuation equation for a contingent…

This paper proposes a hybrid credit risk model, in closed form, to price vulnerable options with stochastic volatility. The distinctive features of the model are threefold. First, both the underlying and the option issuer's assets follow…

We price European options in a class of models in which the volatility of the underlying risky asset depends on the short rate of interest. Our study results in an explicit pricing formula that depends on knowledge of a characteristic…

Black and Cox (1976) claim that the value of junior debt is increasing in asset risk when the firm's value is low. We show, using closed-form solution, that the junior debt's value is hump-shaped. This has interesting implications for the…

This paper considers the pricing of equity-linked life insurance contracts with death and survival benefits in a general model with multiple stochastic risk factors: interest rate, equity, volatility, unsystematic and systematic mortality.…

Credibility theory provides tools to obtain better estimates by combining individual data with sample information. We apply the Credibility theory to a Uniform distribution that is used in testing the reliability of forecasting an interest…

We consider a market model where there are two levels of information. The public information generated by the financial assets, and a larger flow of information that contains additional knowledge about a random time. This random time can…

In this paper we formulate a corporate bond (CB) pricing model for deriving the term structure of default probabilities (TSDP) and the recovery rate (RR) for each pair of industry factor and credit rating grade, and these derived TSDP and…

We consider an approach to credit risk in which the information about the time of bankruptcy is modelled using a Brownian bridge that starts at zero and is conditioned to equal zero when the default occurs. This raises the question whether…

This paper proposes a Monte Carlo technique for pricing the forward yield to maturity, when the volatility of the zero-coupon bond is known. We make the assumption of deterministic default intensity (Hazard Rate Function). We make no…

The replacement closeout convention has drawn more and more attention since the 2008 financial crisis. Compared with the conventional risk-free closeout, the replacement closeout convention incorporates the creditworthiness of the…