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We develop a new approach to approximating asset prices in the context of continuous-time models. For any pricing model that lacks a closed-form solution, we provide a closed-form approximate solution, which relies on the expansion of the intractable model around an “auxiliary” one. We...
Persistent link: https://www.econbiz.de/10011039202
We develop a simulation algorithm for estimating the prices of American-style securities, i.e. securities with …
Persistent link: https://www.econbiz.de/10005630991
-analytical approach are compared with the results of a complex simulation study. …
Persistent link: https://www.econbiz.de/10011078526
In [4], the authors introduced a Markov copula model of portfolio credit risk. This model solves the top-down versus bottom-up puzzle in achieving efficient joint calibration to single-name CDS and to multi-name CDO tranches data. In [4], we studied a general model, that allows for stochastic...
Persistent link: https://www.econbiz.de/10011019095
We value CDS spreads and kth-to-default swap spreads in a tractable shot noise model. The default dependence is modelled by letting the individual jumps of the default intensity be driven by a common latent factor. The arrival of the jumps is driven by a Poisson process. By using conditional...
Persistent link: https://www.econbiz.de/10004992678
We value synthetic CDO tranche spreads, index CDS spreads, kth-to-default swap spreads and tranchelets in an intensity-based credit risk model with default contagion. The default dependence is modelled by letting individual intensities jump when other defaults occur. The model is reinterpreted...
Persistent link: https://www.econbiz.de/10005651682
We model dynamic credit portfolio dependence by using default contagion in an intensity-based framework. Two different portfolios (with 10 obligors), one in the European auto sector, the other in the European financial sector, are calibrated against their market CDS spreads and the corresponding...
Persistent link: https://www.econbiz.de/10005651787
We study a model for default contagion in intensity-based credit risk and its consequences for pricing portfolio credit derivatives. The model is specified through default intensities which are assumed to be constant between defaults, but which can jump at the times of defaults. The model is...
Persistent link: https://www.econbiz.de/10005190946
We study default contagion in large homogeneous credit portfolios. Using data from the iTraxx Europe series, two synthetic CDO portfolios are calibrated against their tranche spreads, index CDS spreads and average CDS spreads, all with five year maturity. After the calibrations, which render...
Persistent link: https://www.econbiz.de/10005190958
This paper develops a model that analyzes the impact of manager-stockholder conflicts and control challenge threats on leverage, firm value and debt restructuring frequency in a contingent claims framework. This is the first theoretical study to merge several lines of research - market for...
Persistent link: https://www.econbiz.de/10012737886