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An Option Theoretic Model for Ultimate Loss-Given-Default with Systematic Recovery Risk and Stochastic Returns on Defaulted Debt

Jacobs, Michael - 2010

In this study we develop a theoretical model for ultimate loss-given default in the Merton (1974) structural credit risk model framework, deriving compound option formulae to model differential seniority of instruments, and incorporating an optimal foreclosure threshold. We consider an extension...

Persistent link: https://www.econbiz.de/10013147946

Stochastic Volatility of Financial Assets and Default Risk

Katz, Yuri A. - 2014

fluctuations of the volatility of the firm's market value of financial assets. The minimal version of the model depends on the …

Persistent link: https://www.econbiz.de/10013048256

Liquidity Risk and Volatility Risk in Credit Spread Models : A Unified Approach

Perrakis, Stylianos - 2017

values from empirical studies that volatility risk, together with deteriorating bond market liquidity, decrease both debt and …We present an integrated framework incorporating both exogenous liquidity risk in the secondary corporate bond market … and volatility risk in the dynamics of asset value in debt rollover models. Using an innovative theoretical approach we …

Persistent link: https://www.econbiz.de/10012973387

Market microstructure effects on firm default risk evaluation

Barsotti, Flavia; Sanfelici, Simona - In: Econometrics : open access journal 4 (2016) 3, pp. 1-31

Default probability is a fundamental variable determining the credit worthiness of a firm and equity volatility … choosing different non parametric equity volatility estimators on default probability evaluation, when market microstructure … noise is considered. A general stochastic volatility framework with jumps for the underlying asset dynamics is defined …

Persistent link: https://www.econbiz.de/10011506497

Explaining credit ratings through a perpetual-debt structural model

Barone, Gaia - In: The journal of credit risk : published quarterly by … 17 (2021) 2, pp. 1-25

Persistent link: https://www.econbiz.de/10012671409

Exponential Lévy models extended by a jump to default

Yamazaki, Akira - In: Applied mathematical finance 20 (2013) 3/4, pp. 211-228

Persistent link: https://www.econbiz.de/10010187668

A stochastic-volatility equity-price tree for pricing convertible bonds with endogenous firm values and default risks determined by the first-passage default model

Dai, Tian-Shyr; Fan, Chen-Chiang; Liu, Liang-Chih; … - In: The journal of futures markets 42 (2022) 12, pp. 2103-2134

Persistent link: https://www.econbiz.de/10013465872

A deep learning approach to estimate forward default intensities

Divernois, Marc-Aurèle - 2020 - Preliminary draft

This paper proposes a machine learning approach to estimate physical forward default intensities. Default probabilities are computed using artificial neural networks to estimate the intensities of the inhomogeneous Poisson processes governing default process. The major contribution to previous...

Persistent link: https://www.econbiz.de/10012419329

Contingent convertible lease modeling and credit risk management

Triki, Ons; Abid, Fathi - In: Financial innovation : FIN 8 (2022), pp. 1-29

The main objective of this study is to determine a lease agreement to finance an investment project and a solution for managing credit risk. This study investigates three types of contingent leases to reduce the costs associated with bankruptcy and compensate for the lessor's position. A leasing...

Persistent link: https://www.econbiz.de/10013413113

Predicting Default – Merton vs. Leland

Forssbæck, Jens - 2017

This paper is the first to compare the ability of the two structural credit risk models of Merton (1974) and Leland (1994a, b) to predict bankruptcy. We investigate different implementations of the Merton and Leland models on the whole CRSP/Compustat universe of firms from 1980 to 2015. Although...

Persistent link: https://www.econbiz.de/10012963330

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