We define a disastrous default as the default of a systemic entity. Such an event is expected to have a negative effect on the economy and to be contagious. Bringing macroeconomic structure to a noarbitrage asset-pricing framework, we exploit prices of disaster-exposed assets (credit and equity...

We build an Affine Term Structure Model that provides non-negative yields at any maturity and that is able to accommodate a short-term rate that stays at the zero lower bound (ZLB) for extended periods of time while longer-term rates feature high volatilities. We introduce these features through...

In this paper, we propose a quadratic term-structure model of the EURIBOR-OIS spreads. As opposed to OIS, EURIBOR rates incorporate credit and liquidity risks. Indeed, a bank that lends on the unsecured market requires compensations for facing (a) the risk of default of the borrowing bank and...