We investigate the determinants of bid-ask spreads on corporate credit default swaps (CDSs). We find that proxies for dealer inventory costs such as variability of CDS premia and CDS trading volume explain as much as 80% of variation in CDS bid-ask spreads. We also analyze the influence of...

We study risk and return properties of capital structure arbitrage strategies aiming to profit from temporal mispricing between equity and credit default swaps (CDSs) of companies. We find that capital structure arbitrage provides an attractive annualized return of 24.35% on invested capital....

The computation of various risk metrics is essential to the quantitative risk management of variable annuity guaranteed bene ts. The current market practice of Monte Carlo simulation often requires intensive computations, which can be very costly for insurance companies to implement and take so...

In this paper, we extend the concept of mutual exclusivity proposed by Dhaene and Denuit (1999) to its tail counterpart and baptise this new dependency structure as tail mutual exclusivity. Probability levels are first specified for each component of the random vector. Under this dependency...

This paper presents the R-package <B>MitISEM</B> (mixture of <I>t</I> by importance sampling weighted expectation maximization) which provides an automatic and flexible two-stage method to approximate a non-elliptical target density kernel -- typically a posterior density kernel -- using an adaptive mixture...</i></b>

We introduce a dynamic Skellam model that measures stochastic volatility from high-frequency tick-by-tick discrete stock price changes. The likelihood function for our model is analytically intractable and requires Monte Carlo integration methods for its numerical evaluation. The proposed...

This paper deals with estimating small tail probabilities of thesteady-state waiting time in a GI/GI/1 queue withheavy-tailed (subexponential) service times. The problem ofestimating infinite horizon ruin probabilities in insurancerisk processes with heavy-tailed claims can be transformed into...

The linear Gaussian state space model for which the common variance istreated as a stochastic time-varying variable is considered for themodelling of economic time series. The focus of this paper is on thesimultaneous estimation of parameters related to the stochasticprocesses of the mean part...

We consider a queue fed by a large number, say n, of on-off sources with generally distributed on-and off-times. The queueing resources are scaled by n: the buffer is B=nb and link rate is C=nc.The model is versatile: it allows us to model both long range dependent traffic (by using heavy-tailed...

Recent models for credit risk management make use of Hidden Markov Models (HMMs). The HMMs are used to forecast quantiles of corporate default rates. Little research has been done on the quality of such forecasts if the underlying HMM is potentially mis-specified. In this paper, we focus on...