This paper extends extant valuation models of interest rate swaps (IRS) with counterparty credit risk by accounting for wrong-way risk and OIS discounting. The proposed model extends Brigo and Pallavicini's (2007) and Ruiz et al.'s (2013) models, by capturing wrong-way risk in the CVA...

In this paper, we present a new model that takes an arbitrage approach to the valuation of catastrophic risk bonds (CAT bonds). The model considers the sponsor's exposure to currency exchange risk and the risk of catastrophic events. We use a jump-diffusion process for catastrophic events, a...

We identify a novel concept of discretionary idiosyncratic volatility proxied by the idiosyncratic volatility component not related to the non-systematic industry volatility as a source of agency problems that have implications for firms’ cash holdings and their investment decisions. We find...