Using a limiting approach to portfolio credit risk, we obtain analyticexpressions for the tail behavior of the distribution of credit losses. We showthat in many cases of practical interest the distribution of these losses haspolynomial ('fat') rather than exponential ('thin') tails. Our...

In this paper we rederive some well known results for continuous time Markov processes that live on a finite state space.Martingale techniques are used throughout the paper. Special attention is paid to the construction of a continuous timeMarkov process, when we start from a discrete time...

Contingent Convertible bonds (CoCos) are debt instruments that convert into equity or are written down in times of distress. Existing pricing models assume conversion triggers based on market prices and on the assumption that markets can always observe all relevant firm information. But all...