In this paper, a closed form path-independent approximation of the fair variance strike for a variance swap under the constant elasticity of variance (CEV) model is obtained by applying the small disturbance asymptotic expansion. The realized variance is sampled continuously in a risk-neutral...

This paper investigates how the market valuation of credit risk changed during 2008-2009 via a separation of the probability of default (PD) and the loss given default (LGD) of credit default swaps ( CDSs), using the information implied by equity options. While the Lehman Brothers collapse in...

This paper develops a framework to estimate the probability of default (PD) implied in listed stock options. The underlying option pricing model measures PD as the intensity of a jump diffusion process, in which the underlying stock price jumps to zero at default. We adopt a two-stage...

This paper presents a novel application of advanced methods from Fourier analysis to the study of ultra-high-frequency financial data. The use of Lomb-Scargle Fourier transform, provides a robust framework to take into account the irregular spacing in time, minimising the computational effort....