In this paper, we propose a general method for pricing and hedging non-standard American options. The proposed method applies to any kind of American-style contract for which the payoff function has a Markovian representation in the state space. Specifically, we obtain an analytic solution for...

We examine the question of the determinants of corporate bond credit spreads using both weekly and monthly option-adjusted spreads for nine corporate bond indexes from Merrill Lynch from January 1997 to July 2002. We find that the Russell 2000 index historical return volatility and the...

We examine the question of the determinants of corporate bond credit spreads using both weekly and monthly option-adjusted spreads for nine corporate bond indexes from Merrill Lynch from January 1997 to July 2002. We find that the Russell 2000 index historical return volatility and the...

This paper revisits the question of the determinants of corporate bond credit spreads using some new explanatory variables with both weekly and monthly option-adjusted credit spreads of corporate bond indices from Merrill Lynch. We find that among the new variables, the interest rate historical...

There is no consensus on whether macroeconomic fundamentals have any predictive power for bond risk premia, either unconditionally or conditionally over bond yields. Using Adaptive Group LASSO, a machine learning algorithm, we are able to construct a new, parsimonious macro variable that is...

In this paper we conduct a specification analysis of structural credit risk models, using term structure of credit default swap (CDS) spreads and equity volatility from high-frequency return data. Our study provides consistent econometric estimation of the pricing model parameters and...

quot;Inflation-indexed securities would appear to be the most direct source of information about inflation expectations and real interest ratesquot; (Bernanke, 2004). In this paper we study the term structure of real interest rates, expected inflation and inflation risk premia using data on...

quot;Inflation-indexed securities would appear to be the most direct source of information about inflation expectations and real interest rates.quot; (Bernanke, 2004). In this paper we study the term structure of real interest rates, expected inflation, and inflation risk premia using data on...

This paper estimates inflation risk premia using data on prices of Treasury Inflation Protected Securities (TIPS) over the period 2000-2008. The estimation approach used is arbitrage free, largely model free, and easy to implement. It also distinguishes between TIPS yields and real yields by...

Empirical studies of structural credit risk models so far are often based on calibration, rolling estimation, or regressions. This paper proposes a GMM-based method that allows us to both consistently estimate the model parameters and test whether all the restrictions of the model are satisfied....