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An Empirical Comparison of Default Swap Pricing Models

Houweling, Patrick; Vorst, Ton - EconWPA - 2001

In this paper we compare market prices of credit default swaps with model prices. We show that a simple reduced form model with a constant recovery rate outperforms the market practice of directly comparing bonds' credit spreads to default swap premiums. We find that the model works well for...

Persistent link: https://www.econbiz.de/10005413092

Simulation-Based Pricing of Convertible Bonds

Ammann, Manuel; Kind, Axel; Wilde, Christian - EconWPA - 2005

We propose and empirically study a pricing model for convertible bonds based on Monte Carlo simulation. The method uses … parametric representations of the early exercise decisions and consists of two stages. Pricing convertible bonds with the … pricing study of the US market, using 32 convertible bonds and 69 months of daily market prices. Our results do not confirm …

Persistent link: https://www.econbiz.de/10005413169

Implied Calibration of Stochastic Volatility Jump Diffusion Models

Galluccio, Stefano; Cam, Yann Le - EconWPA - 2005

models in the affine- quadratic class for the purpose of contingent claims pricing and risk- management. In particular, we …

Persistent link: https://www.econbiz.de/10005076950

A semi-analytical approach to Canary swaptions in HJM one-factor model

Marc, Henrard - EconWPA - 2003

Leveraging the explicit formula for European swaptions and coupon-bond options in HJM one-factor model, we develop a semi-explicit formula for 2-Bermudan options (also called Canary options). We first extend the European swaption formula to future times. We are able to reduce the valuation of a...

Persistent link: https://www.econbiz.de/10005076977

An empirical analysis of structural models of corporate debt pricing

Teixeira, Joao C. A. - EconWPA - 2005

This paper tests empirically the performance of three structural models of corporate bond pricing, namely Merton (1974 …

Persistent link: https://www.econbiz.de/10005076981

Explicit bond option and swaption formula in Heath-Jarrow-Morton one factor model

Henrard, Marc - EconWPA - 2003

We present an explicit formula for European options on coupon bearing bonds and swaptions in the Heath-Jarrow-Morton (HJM) one factor model with non-stochastic volatility. The formula extends the Jamshidian formula for zero-coupon bonds. We provide also an explicit way to compute the hedging...

Persistent link: https://www.econbiz.de/10005076984

Efficient Path-Dependent Valuation Using Lattices: Fixed and Floating Strike Asian Options

Abrahamson, Allen - EconWPA - 2003

A lattice-based method is advanced for evaluating functionals of sequences of path-wise values of a lattice's state variable. For the Asian call valuations in this paper, the lattices discretely replicate the stochastic future states of conventionally prescribed, lognormally distributed, equity...

Persistent link: https://www.econbiz.de/10005076988

Convexity adjustment and delivery option in Australian dollar 90 Day Bills Futures

Henrard, Marc - EconWPA - 2005

Australian dollar bills futures are very particular, not only on the valuation at expiry but also for the maturity delivery option and the credit delivery option. This note consider only the interest rate part of the futures (marginning and maturity delivery option). An explicit formula for the...

Persistent link: https://www.econbiz.de/10005077000

Simple Formulas to Option Pricing and Hedging in the Black- Scholes Model

pianca, paolo - EconWPA - 2005

For option whose striking price equals the forward price of the underlying asset, the Black-Scholes pricing formula can …

Persistent link: https://www.econbiz.de/10005077015

From Default Probabilities To Credit Spreads: Credit Risk Models Do Explain Market Prices

Denzler, Stefan; Dacorogna, Michel M.; Mueller, Ulrich A.; … - EconWPA - 2005

Credit risk models like Moody’s KMV are now well established in the market and give bond managers reliable estimates of default probabilities for individual firms. Until now it has been hard to relate those probabilities to the actual credit spreads observed on the market for corporate bonds....

Persistent link: https://www.econbiz.de/10005077017

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