Motivated by the risk of stopped debt coupon payments from a leveraged company in iuml;B01nancial distress, we value a level dependent annuity contract where the annuity rate depends on the value of an underlying asset-process. The range of possible values of the asset is divided into a...

Credit spreads and default policy are analyzed in a structural model. Agents have incomplete information about the company's EBIT process and observe it with time delays. When all agents observe the state variable with the same delay, it has a minor effect on credit spreads and default policy....

This article integrates aspects of traditional insurance with advances in financial economics, yielding proper valuation and premium assessments of insurance benefits linked to various financial assets. Several new types of unit-linked life insurance contracts are discussed with substantial...

Consider a traditional life insurance contract paid with a single premium. In addition to mortality factors, the relationship between the fixed amount of benefit and the single premium depends on the interest rate (calculation rate). The calculation rate can be interpreted as the average rate...

In many countries, traditional life insurance products include a fixed percentage guarantee on each year's return. This article presents a model for the valuation of life insurance contracts including a guaranteed minimum return. The model is based on the notion of no arbitrage opportunities...

Issuances in the USD 260 Bn global market of perpetual risky debt are often motivated by capital requirements for financial institutions. We analyze callable risky perpetual debt emphasizing an initial protection ('grace') period before the debt may be called. The total market value of debt...

Performance-sensitive debt (PSD) contracts link a loan's interest rate to a measure of the borrower's credit relevant performance, e.g. if the borrower's debt to cash ow ratio deteriorates, the interest rate increases according to a predetermined schedule. We derive and empirically test a...