A heat kernel approach is proposed for the development of a novel method for asset pricing over a finite time horizon. We work in an incomplete market setting and assume the existence of a pricing kernel that determines the prices of financial instruments. The pricing kernel is modeled by a...

In this paper, I address the price discovery process in the Euro zone sovereign credit risk markets. In particular, I analyse the dynamics between CDS spreads and bond credits spreads, which are regarded by market participants as close substitutes. Indeed, by no-arbitrage conditions there should...

We extend the common Poisson shock framework reviewed for example in Lindskog and McNeil [15] to a formulation avoiding repeated defaults, thus obtaining a model that can account consistently for single name default dynamics, cluster default dynamics and default counting process. This approach...