In this paper, we present a novel method to extract the risk-neutral probability of default from American put option prices. Under the assumptions of Carr and Wu (2011), we derive a closed form expression for American put options from which the probability of default can be inferred. Our...

In this work, we suggest a novel quadratic programming-based algorithm to generate an arbitrage-free call option surface. Our approach relies on a regression spline-based implementation of the framework proposed by Orosi (2011) who presents a multi-parameter extension of the models of Figlewski...

In this paper, we derive closed-form, interpolation-based expressions for European call options written on defaultable assets. Our results are based on the work of Henderson at al. (2007), who derive formulas that incorporate standard static no-arbitrage restrictions, and Orosi (2014) who...