In the line of Cossette et al. (2003), we adapt and refine known Markovian-type risk models of Asmussen (1989) and Lu and Li (2005) to a hurricane risk context. These models are supported by the findings that El Niño/Southern Oscillation (as well as other natural phenomena) influence both the...

An important research area of the corporate yield spread literature seeks to measure the proportion of the spread explained by various factors such as the possibility of default, liquidity or tax differentials. We contribute to this literature by assessing the ability of observed macroeconomic...

One critical difficulty in implementing Merton's (1974) credit risk model is that the underlying asset value cannot be directly observed. The model requires the unobserved asset value and the unknown volatility parameter as inputs. The estimation problem is further complicated by the fact that...

Linearized versions of the Nelson-Siegel and Svensson models for estimating spot yield curves from samples of coupon bonds are developed and analyzed. It is shown how these models can be made linear in the level, slope and curvature parameters and how prior information about these parameters can...

Monte Carlo simulation is commonly used for computing prices of derivative securities when an analytical solution does not exist. Recently, a new simulation technique known as empirical martingale simulation (EMS) has been proposed by Duan and Simonato (1998) as a way of improving simulation...