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Exploring for the Determinants of Credit Risk in Credit Default Swap Transaction Data: Is Fixed-Income Markets’ Information Suffcient to Evaluate Credit Risk?

Cossin, Didier; Hricko, Tomas; Aunon-Nerin, Daniel; … - Swiss Finance Institute - 2002

We investigate the influence of various fundamental variables on a cross-section of credit default swap transaction data. Credit default swap rates can be seen as a superior proxy to credit risk than bond spreads are. Because we have transaction prices rather than quotes, we have thus...

Persistent link: https://www.econbiz.de/10005248398

Sovereign Debt Contract and Optimal Consumption-Investment Strategies

DEMCHUK, Andriy - Swiss Finance Institute - 2003

We present a model in which a sovereign country optimally decides on its consumption and investment policies as well as on the optimal time to default. In the paper we allow the sovereign borrower to keep the fraction of its augmented wealth in so-called international reserves. We further assume...

Persistent link: https://www.econbiz.de/10005248402

Option Pricing with Discrete Rebalancing

PRIGENT, Jean-Luc; RENAULT, Olivier; SCAILLET, Olivier - Swiss Finance Institute - 2002

We consider option pricing when dynamic portfolios are discretely rebalanced. The portfolio adjustments only occur after ¯xed relative changes in the stock price. The stock price follows a marked point process and the market is incomplete. We first characterisethe equivalent martingale...

Persistent link: https://www.econbiz.de/10005264584

Defaultable Security Valuation and Model Risk

AKGUN, Aydin - Swiss Finance Institute - 2001

The aim of the paper is to analyse the effects of different model specifications, within a general nested framework, on the valuation of defaultable bonds, and some credit derivatives. Assuming that the primitive variables such as the risk-free short rate, and the credit spread are affine...

Persistent link: https://www.econbiz.de/10005264590

The Dynamics of Mergers and Acquisitions

Morellec, Erwan; Zdhanov, Alexei - Swiss Finance Institute - 2004

This paper presents a dynamic model of takeovers based on the stock market valuations of merging firms. The model incorporates competition and imperfect information and determines the terms and timing of takeovers by solving option exercise games between bidding and target shareholders. The...

Persistent link: https://www.econbiz.de/10005612045

Quantitative Selection of Long-Short Hedge Funds

CHEN, Kaifeng; PASSOW, Alexander - Swiss Finance Institute - 2003

We develop a quantitative model to select hedge funds in the long-short equity sector. The selection strategy is verified on a survivorship-bias-free hedge fund database, from January 1990 to September 2002. We focus on the hedge funds acting exclusively in the U.S. market. We identify...

Persistent link: https://www.econbiz.de/10005612046

Liquidity and Credit Risk

ERICSSON, Jan; RENAULT, Olivier - Swiss Finance Institute - 2001

We develop a simple binomial model of liquidity and credit risk in which a bondholder has the option to time the sale … of his security, given a distribution of potential buyers, bids and liquidity shocks. We examine first the case without … default and find that our model predicts decreasing term structures of liquidity premia, consistent with empirical evidence …

Persistent link: https://www.econbiz.de/10005612049

Interactions Between Market and Credit Risk: Modeling the Joint Dynamics of Default-Free and Defaultable Bond Term Structures

WALDER, Roger - Swiss Finance Institute - 2002

The objective of this paper is to model and estimate simultaneously the joint dynamics of default-free and defaultable bond term structures. Defaultable bond prices are modeled in an intensity based framework along the lines of Duffie and Singleton (1999) with state variables following an affine...

Persistent link: https://www.econbiz.de/10005612050

Investment under Uncertainty and Incomplete Markets

Hugonnier, Julien; Morellec, Erwan - Swiss Finance Institute - 2004

In the standard real options approach to investment under uncertainty, agents formulate optimal policies under the assumptions of risk neutrality or perfect capital markets. However in most situations, corporate executives face incomplete markets either because they receive compensation packages...

Persistent link: https://www.econbiz.de/10005612052

Serial and Parallel Krylov Methods for Implicit Finite Difference Schemes Arising in Multivariate Option Pricing

KËLLEZI, Evis; PAULETTO, Giorgio - Swiss Finance Institute - 2001

This paper investigates computational and implementation issues for the valuation of options on three underlying assets, focusing on the use of the finite difference methods. We demonstrate that implicit methods, which have good convergence and stability prooperties, can now be implemented...

Persistent link: https://www.econbiz.de/10005612061