We present a discrete time model of expected bond returns (EBR). These are ex-ante expectations implied by the market prices and the data set available when bond prices are quoted. The model can be used to estimate the rating-adjusted EBR, its risk premium components, including a certainty...

Merton (1974) suggested a structural model for default prediction which allows using timely information from the equity market. The literature describes several specifications to the application of the model, including methods presumably used by practitioners. However, recent studies demonstrate...

We present the valuation of contracts that combine financial structured products and insurance policies - pure endowment insurance and risk insurance contracts. The embedded options in these products promise, upon exercise, the higher of either the future value of the invested fund in risk-free...

Advance pricing agreements are long-term contracts between multinational taxpayers and tax authority(ies), according to which the taxpayer consents to use the agreed upon transfer price for its related transactions for a fixed period of time. We argue that for such an agreement to be based on...