This paper develops a rich class of discrete-time, nonlinear dynamic term structure models (DTSMs). Under the risk-neutral measure, the distribution of the state vector Xt resides within a family of discrete-time affine processes that nests the exact discrete-time counter parts of the entire...

In this paper, I propose a general pricing framework that allows the risk-neutral dynamics of loss given default (LQ) and default probabilities (lambdaQ) to be separately and sequentially discovered. The key is to exploit the differentials in LQ exhibited by different securities on the same...