In a default corridor [0; B] that the stock price can never enter, a deep out-of-the-money American put option replicates a pure credit contract (Carr and Wu, 2011). Assuming discrete (one-period-ahead predictable) cash áows, we show that an endogenous credit-risk model generates, along with the...

We assume that some consistent estimator of an equilibrium relation between non-stationary fractionally integrated series is used in a first step to compute residuals (or differences thereof). We propose to apply the semiparametric log-periodogram regression to the (differenced) residuals in...

We consider cointegration rank estimation for a p-dimensional Fractional Vector Error Correction Model. We propose a new two-step procedure which allows testing for further long-run equilibrium relations with possibly different persistence levels. The first step consists in estimating the...