Funahashi and Kijima (in press, A chaos expansion approach for the pricing of contingent claims, <italic>Journal of Computational Finance</italic>) have proposed an approximation method based on the Wiener--Ito chaos expansion for the pricing of European-style contingent claims. In this paper, we extend the...

We propose a structural model with a joint process of tangible assets (marker) and firm status for the pricing of corporate securities. The firm status is assumed to be latent or unobservable, and default occurs when the firm status process reaches a default threshold at the first time. The...

Stochastic orders and inequalities are very useful tools in various areas of economics and finance. The purpose of this paper is to describe main results obtained so far by using the idea of stochastic orders in financial optimization. Especially, the emphasis is placed on the demand and shift...

This paper examines the B¨uhlmann’s equilibrium pricing model (1980) in the presence of transaction cost and derives the (multivariate) Esscher transform within the framework under some assumptions. The result reveals that the Esscher transform is an appropriate probability transform for the...

Funahashi and Kijima (2013) have proposed an approximation method based on the Wiener-Ito chaos expansion for the pricing of European-style contingent claims. In this paper, we extend the method to the multi-asset case with general local volatility structure for the pricing of exotic basket...

Based on a continuous-time model of quasi-hyperbolic discounting, this paper provides an analytically tractable framework of entrepreneurial firms’ investment and capital structure decisions with time-inconsistent preferences. We show that the impact of time-inconsistent preferences depends...

Recent empirical studies have demonstrated the informative nature of the equity returns in explaining the variation of the underlying firm's credit default swap (CDS) spreads. Motivated by these findings, we propose a unified credit-equity model by extending the latent structural model in Kijima...