In order to derive closed-form expressions of the prices of credit derivatives, standard credit-risk models typically price the default intensities, but not the default events themselves. The default indicator is replaced by an appropriate prediction and the prediction error, that is the...

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 define a disastrous default as the default of a systemic entity, which has a negative effect on the economy and is contagious. Bringing macroeconomic structure to a no-arbitrage asset pricing framework, we exploit prices of disaster-exposed assets (credit and equity derivatives) to extract...