This paper presents a novel method to price discretely-monitored single- and double-barrier options in Levy process-based models. The method involves a sequential evaluation of Hilbert transforms of the product of the Fourier transform of the value function at the previous barrier monitoring...

We present a fast and accurate method to compute exponential moments of the discretely observed maximum of a Levy process. The method involves a sequential evaluation of Hilbert transforms of expressions involving the characteristic function of the (Esscher transformed) Levy process. It can be...

This paper proves existence of the long bond, long forward measure and long-term factorization of the stochastic discount factor (SDF) of Alvarez and Jermann (2005) and Hansen and Scheinkman (2009) in Heath-Jarrow-Morton (HJM) models in the function space framework of Filipovic´ (2001). A...

This paper constructs and studies the long-term factorization of affine pricing kernels into discounting at the rate of return on the long bond and the martingale component that accomplishes the change of probability measure to the long forward measure. The principal eigenfunction of the affine...

We show that the martingale component in the long-term factorization of the stochastic discount factor due to Alvarez and Jermann (2005) and Hansen and Scheinkman (2009) is highly volatile, produces a downward-sloping term structure of bond Sharpe ratios, and implies that the long bond is far...

This document contains complementary material of section 6 of the article "Marshall-Olkin Distributions, Subordinators, Efficient Simulation, and Applications to Credit Risk". In particular, we provide the time-inhomogeneous extensions of Theorems 4.1 and 4.2 of the main document. These results...

The paper presents a novel construction of Marshall-Olkin (MO) multivariate exponential distributions of failure times as distributions of the first passage times of the coordinates of multidimensional Levy subordinator processes above independent unit-mean exponential random variables. A...

This paper develops an eigenfunction expansion approach to solve discretely monitored first passage time problems for a rich class of Markov processes, including diffusions and subordinate diffusions with jumps, whose transition or Feynman-Kac semigroups possess eigenfunction expansions in L2...

This paper develops a computational framework to value convertible bonds in general multi-factor Markovian models with credit risk. We show that the convertible bond value function satisfies a variational inequality formulation of the stochastic game between the bondholder and the issuer. We...

This paper develops a novel class of hybrid credit-equity models with state-dependent jumps, local-stochastic volatility and default intensity based on time changes of Markov processes with killing. We model the defaultable stock price process as a time changed Markov diffusion process with...