This paper proposes a path-dependent approach for estimating maximum appreciations of the renminbi expected by the market based on first-passage-time distributions. Using market data of the renminbi spot exchange rates, non-deliverable forward rates and currency option prices from 21 July 2005...

The theoretical prediction of target exchange rates expects mean reversion of the exchange rates. This paper presents a model for valuing European foreign exchange options, in which the forward foreign exchange rate follows a mean-reverting lognormal process. The mean-reverting process has...

This paper proposes a path-dependent approach for estimating realignment probabilities of targeted exchange rates based on first-passage-time distributions instead of the commonly used path-independent approach. We consider that path dependency is an intrinsic characteristic of realignment risk...

This paper assesses whether agency ratings and market-based default risk measures are consistent for East Asian banks during the period 1996 to 2006. While the market-based measures are broadly consistent with the credit rating assessments for banks in developed economies, the discrepancy...

Merton-type models of pricing corporate bonds based on relatively simple default processes cannot generate credit spreads which replicate empirically observed spreads. This paper presents an analytical valuation model of corporate discount bond prices to address this problem. The main feature of...

Based upon the Fourier series expansion, we propose a simple and easy-to-use approach for computing accurate estimates of Black-Scholes double barrier option prices with time-dependent parameters. This new approach is also able to provide tight upper and lower bounds of the exact barrier option...

In this paper we present a Lie-algebraic technique for the valuation of multi-asset financial derivatives with time-dependent parameters. By exploiting the dynamical symmetry of the pricing partial differential equations of the financial derivatives, the new method enables us to derive...

In this paper we apply the Lie-algebraic technique for the valuation of moving barrier options with time-dependent parameters. The value of the underlying asset is assumed to follow the constant elasticity of variance (CEV) process. By exploiting the dynamical symmetry of the pricing partial...

The quot;structural approachquot; to modeling credit risk specifies a stochastic process that the net asset value of the issuing firm is assumed to follow. If firm value falls below a certain quot;default barrier,quot; bankruptcy is triggered and the firm is assumed to default on its vulnerable...

Based upon the Wei-Norman theorem, this paper presents a Lie-algebraic technique for the pricing of financial derivatives with time-dependent parameters. By exploiting the dynamical symmetry of the pricing partialdifferential equations of the financial derivatives, the new method enables us to...