We consider option pricing when dynamic portfolios are discretely rebalanced. The portfolio adjustments only occur after ¯xed relative changes in the stock price. The stock price follows a marked point process and the market is incomplete. We first characterisethe equivalent martingale...

This paper studies times-to-default of individual firms across risk classes. Using Standard & Poor’s ratings database we investigate common drivers of default probabilities and address two shortcomings of many papers in the credit literature. First, we identify relevant determinants of default...

We develop a simple binomial model of liquidity and credit risk in which a bondholder has the option to time the sale of his security, given a distribution of potential buyers, bids and liquidity shocks. We examine first the case without default and find that our model predicts decreasing term...

We study the dynamics of the spread between US corporate and Treasury bonds. We focus on Aaa and Baa corporate yield indices and estimate nonparametrically the dynamics of the spreads assuming that they follow a univariate diffusion process. Using technique developed for interest rate processes...

This paper offers an option pricing framework grounded in econometric microstructure modelling. We consider a model where stock price dynamics follow a pure jump process with constant jump size similar to a binomial setting with random time steps. Jump arrival times are described as an...