Contingent Convertibles (“CoCos”) are contingent capital instruments which convert into shares, or have a principal write down, if a trigger event takes place. CoCos exhibit the undesirable so-called death-spiral effect: by actively hedging the equity risk, investors can (unintentionally)...

This paper examines a two-level distribution system consisting of a central warehouse (CW) supplying several branch warehouses (BW's), which, in turn, supply normally-distributed customer demands in a periodic-review environment. The CW replenishes system inventory using a base-stock...

In this paper we discuss moment swaps. These derivatives depend on the realized higher moments of the underlying. A special case is the nowadays popular variance swaps. After introducing moment swaps we discuss how to hedge these derivatives. Moreover, we show how the classical hedge of the...

In this paper, we study a new class of tractable diffusions suitable for model's primitives of interest rates. We consider scalar diffusions with scale s′(x) and speed m(x) densities discontinuous at the level x*. We call that family of processes Self Exciting Threshold (SET) diffusions....

The rating of asset-backed securities is partly based on quantitative models for the defaults and prepayments of the assets in the pool. This quantitative approach contains a number of assumptions and estimations of input variables whose values are affected by uncertainty. The uncertainty in...

Deposit Guarantee Schemes (DGSs) are institutions whose main aim is to provide a safety net for depositors. If a bank fails, depositors will recover their bank deposits up to a certain limit. During the recent financial crisis, DGSs were brought at the centre of the political and financial...

Static and discrete time pricing operators for two price economies are reviewed and then generalized to the continuous time setting of an underlying Hunt process. The continuous time operators define nonlinear partial integro–differential equations that are solved numerically for the three...