We model the uniform-price US Treasury security auction as a static symmetric game of incomplete information in which each payer is a primary dealer who submits a demand schedule given two independent sources of private information – his pre-auction short position of the auctioned security,...

This research attempts to propose closed-form solutions for prices of credit-risky bonds, assuming a nonzero correlation between interest rates and credit spreads. The times of default of a credit-risky bond are modelled as the jump times of a Cox process, following the method of Lando, with an...

We propose a new derivation of the Heath–Jarrow–Morton risk-neutral drift restriction that takes into account nonzero instantaneous correlations between factors. The result allows avoiding the orthogonalization of factors and provides an approach by which interest rate derivatives can be...

The purpose of this paper is to derive an easy-to-implement and highly accurate formula to approximate the change in the bond price resulting from a change in interest rates. The bond price is raised to an infinitesimal power and the Taylor series expansion is applied. Then, using the well-known...

Using a finite dimensional Hilbert space framework, this work proposes a new derivation of the HJM [D. Heath, R. Jarrow, A. Morton, Bond pricing and the term structure of interest rates: A New Methodology for Contingent Claims Valuation, Econometrica 60 (1992) 77-105] risk-neutral drift that...

This paper proposes closed-form solutions for pricing credit-risky discount bonds and their European call and put options in the intensity-based reduced-form framework, assuming the stochastic dynamics of both the risk-free interest rate and the credit-spread are driven by two correlated Ho-Lee...