A forward intensity model for the prediction of corporate defaults over different future periods is proposed. Maximum pseudo-likelihood analysis is then conducted on a large sample of the US industrial and financial firms spanning the period 1991–2011 on a monthly basis. Several commonly used...

This paper proposes a simple modification to the standard Monte Carlo simulation procedure for computing the prices of derivative securities. The modification imposes the martingale property on the simulated sample paths of the underlying asset price. This procedure is referred to as the...

This paper considers the pricing of options when there are jumps in the pricing kernel and correlated jumps in asset returns and volatilities. Our model nests Duan’s GARCH option models, where conditional returns are constrained to being normal, as well as mixed jump processes as used in...

This paper analyzes a class of nonnegative processes for the short-term interest rate. The dynamics of interest rates and yields are driven by the dynamics of the conditional volatility of the pricing kernel. We study Markovian interest rate processes as well as more general non-Markovian...