This paper formulates and analyzes a dynamic optimization problem of bond portfolios within Markovian Heath-Jarrow-Morton term structure models. In particular, we investigate optimal yield curve strategies analytically and numerically, and provide theoretical justification for a typical strategy...

This paper proposes a method to price convertible bonds with credit risk using Duffie-Singleton approach to handle credit risk. As such it also provides a method to replicate convertibles by trading common stocks and corporate bonds of the issuing company. Empirical comparison with existing...

This paper proposes a structural model to price credit risk of firms with short-term and long-term debts. This enables one to distinguish between default probabilities in the short run and in the long run, and to identify how the composition of debts affects credit risk. We endogenize the banks'...

This paper formulates and analyzes a dynamic optimization problem of bond portfolios within Markovian Heath-Jarrow-Morton term structure models. In particular, we investigate optimal yield curve strategies analytically and numerically, and provide theoretical justification for a typical strategy...

This paper proposes a new approach to style analysis by utilizing a general state space model and Monte Carlo filter. In particular,We regard coefficients of style indices as state variables in the state space model and apply Monte Carlo filter as estimation method. Moreover, an empirical...

We propose a new method to value convertible bonds(CBs). In particular, we explicitly take default risk into consideration based on Duffie-Singleton(1999), and provide a consistent and practical method for relative pricing of securities issued by a firm such as CBs, non-convertible corporate...

This is a short essay motivated by the author's concern about the creation of a new series of lumpy credit risk exposures entering Japanese bank portfolios, in particular through recent c omeback of real estate transactions. The essay will be printed in "Keizai Kyousitsu" of the Nikkei Morning...

In recent years, empirical researchers show that the higher credit risk, the lower the cross-sectional average stock returns. Although it seems that this result is puzzling in a standard financial pricing theory, we show that, in a production based model with a zero-coupon bond, negative...

This paper proposes a structural model to price credit risk of firms with short-term and long -term debts. In Ikeda, Kobayashi, and Takahashi (2005), since it assumed that the short-term debt is refunded by issuing a new short-term debt only, the future face value of the short-term debt depends...

This study examines life-cycle optimal consumption and asset allocation in the presence of human capital. Labor income seems like a "money market mutual fund" whose balance in one or two years is predictable but a wide dispersion results after many years, reflecting fluctuations in economic...