This paper studies the family of quot;extendedquot; affine term structure models (EATSM), whereby the solution for a discount bond prices involves separation of variables and finite difference numerical solutions. As quadratic term structure models, EATSM are unaffected by the admissibility...

This paper presents three factor Extended Gaussian term structure models (EGM) to price default-free and defaultable bonds. To price default-free bonds EGM assume that the instantaneous interest rate is a possibly non-linear but monotonic function of three latent factors that follow correlated...

This paper presents the family of Mixed-Gaussian (MG) term structure models. In MG models the instantaneous interest rate is a linear function of multiple correlated latent stochastic factors, at least one factor follows a Vasicek-type process, and the bond pricing equation can be solved through...

This paper studies how participation exemption (PEX) tax rules for stocks owned by companies, which are frequent in EU countries, introduce tax arbitrage opportunities. The focus is on Italy’s PEX rules. PEX enables companies to make manufactured loans that generate tax exempt interest income...

This paper presents closed form solutions to price secured bank loans and financial leases subject to default risk. Secured debt fair credit spreads always increase in the debtor's default probability, whereas financial leasing fair credit spreads may well decrease in the lessee's default...

This article presents a discrete time pricing model whereby prices are either exponential linear-quadratic functions of stochastic factors or transforms of such exponential linear-quadratic functions. The model is applied to price default-free bonds and stock options under stochastic volatility...

This study explores how a firm's credit risk affects accounting based valuation of the firm, of its equity and of its debt. The valuation model integrates fundamental equity and credit analysis and, under appropriate conditions, abides by the value conservation principle even in the presence of...