This paper presents a valuation model for pension benefit guarantees based on discrete timeapproximations of one and two factor models of the term structure, based on the pricing modelsof Ho and Lee (1986), Hull and White (1994a) and (1994b), and Heath, Jarrow, Morton(1991). It is shown that...

The model, by using a contingent claim approach, determines the fair value of the banks liabilities accounting for the protection and the surrender possibility. Furthermore, it determines the implied duration of banks liabilities so to show that the surrender possibility will reduce the...

The model, by using a contingent claim approach, determines the fair value of the banks liabilities accounting for the protection and the surrender possibility. Furthermore, it determines the implied duration of banks liabilities so to show that the surrender possibility will reduce the...

This paper presents the first analysis of open-end leverage certificates on the Germanmarket. The major innovations of these certificates are twofold. First, issuers announcea price-setting formula according to which they are willing to buy and sell thecertificates over time. Second, the...

Most derivative contracts are traded over-the-counter, i.e., bilaterally between two counterparties. Recently, clearing services have become available that allow to transfer over-the-counter derivatives to a central counterparty (clearing house). We develop a framework to determine the effects...

In this paper we analyze the source and magnitude of marketing gains from selling structured debtsecurities at yields that reflect only their credit ratings, or specifically at yields on equivalently ratedcorporate bonds. We distinguish between credit ratings that are based on probabilities of...

We present a banking model with imperfect competition in which borrowers' access to credit is improved when banks are able to transfer credit risks. However, the market for credit risk transfer (CRT) works smoothly only if the quality of loans is public information. If the quality of loans is...

Modelling portfolio credit risk is one of the crucial challenges faced by financial services industry in the last few years. We propose the valuation model of collateralized debt obligations (CDO) based on copula functions with up to three parameters, with default intensities estimated from...

This paper considers a simple model of credit risk and derives the limit distribution of losses under different assumptions regarding the structure of systematic and idiosyncratic risks and the nature of firm heterogeneity. The theoretical results obtained indicate that if firm-specific risk...

The paper reviews origins of the approach to pricing derivatives post-crisis by following three papers that have received wide acceptance from practitioners as the theoretical foundations for it - [Piterbarg 2010], [Burgard and Kjaer 2010] and [Burgard and Kjaer 2013]. The review reveals several...