This paper provides an alternative approach to Duffie and Lando [Econometrica 69 (2001) 633–664] for obtaining a reduced form credit risk model from a structural model. Duffie and Lando obtain a reduced form model by constructing an economy where the market sees the manager’s information set...

Data collection in the UK can be traced back to Roman times with the introduction of 5-yearly population censuses however it is only in recent history that the acquisition, distribution and analysis of quantitative data in digital format has been possible. 1967 saw the establishment of the SSRC...

This paper provides a survey of results on the quantiles of a Brownian motion with drift as well as a general Lévy process. The motivation is to calculate the price of related financial options. At the end of the paper some new results on variability orderings between various quantities...

We consider the problem faced by a decision maker who can switch between two random payoff flows. Each of these payoff flows is an additive functional of a general 1D Ito diffusion. There are no bounds on the number or on the frequency of the times at which the decision maker can switch, but...

Although the square-root process has long been used as an alternative to the Black-Scholes geometric Brownian motion model for option valuation, the pricing of Asian options on this diffusion model has never been studied analytically. However, the additivity property of the square-root process...

We use the Cox process (or a doubly stochastic Poisson process) to model the claim arrival process for catastrophic events. The shot noise process is used for the claim intensity function within the Cox process. The Cox process with shot noise intensity is examined by piecewise deterministic...

In this paper, we study the integral over time of the instantaneous rate, i.e. the interest rate accrual, in the Cox Ingersoll Ross model. We derive distributional results for this process, including series representations for the density and probability distribution function. Applications to...

Given a Markovian Brownian martingale Z, we build a process X which is a martingale in its own filtration and satisfies X1=Z1. We call X a dynamic bridge, because its terminal value Z1 is not known in advance. We compute its semimartingale decomposition explicitly under both its own filtration...

Local wage variations in the UK are explained by two non-nested rival hypotheses. The first derives from new economic geography theory, in which wages depend on market potential. The second come from urban economics theory, giving a reduced form with wage rates dependent on employment density....

This paper contains a general equilibrium model of an economy with incomplete markets (GEI) with money and default. The model is a simplified version of the real world consisting of a non-bank private sector, banks, a central bank, a government and a regulator. The model is used to analyse...