This paper presents a framework in which many structural credit risk models can be made hybrid by randomizing the default trigger, while keeping the capital structure intact. This produces random recovery rates negatively correlated with the default probability. The approach is implemented on a...

Security prices are important inputs for estimating credit risk. Yet, to obtain an accurate firm-specific credit risk assessment, one needs a reliable model and a methodology that filters the elements unrelated to the firm's fundamentals from market prices.In this article, we introduce a hybrid...

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...

Although the finance literature has devoted a lot of research into the development of advanced models for improving the pricing and hedging performance, there has been much less emphasis on approaches to measure dynamic hedging effectiveness. This article discusses a statistical framework based...

The actuary and its environment -- Financial markets and their securities -- Forwards and futures -- Swaps -- Options -- Engineering basic options -- Engineering advanced derivatives -- Equity-linked insurance and annuities -- One-period binomial tree model -- Two-period binomial tree model --...