Abstract: In this paper we compare market prices of credit default swaps with model prices. We show that a simple reduced form model with a constant recovery rate outperforms the market practice of directly comparing bonds' credit spreads to default swap premiums. We find that the model works...

This paper studies empirical issues of one-factor yield curve models. We focus on the models by Ho & Lee (1986), Hull & White (1990) and Moraleda & Vorst (1996). To be consistent in the comparison of the models, we derive them all within the Ritkchen and Sankarasubramanian (1995) framework,...

In this paper we introduce a new methodology to price American put options under stochastic interestrates. The method is a combination of an analytic approach and a binomial tree approach. We constructa binomial tree for the forward risk adjusted tree and calculate analytically the expected...

In this paper we compare market prices of credit default swaps with model prices. We showthat a simple reduced form model with a constant recovery rate outperforms the market practice ofdirectly comparing bonds' credit spreads to default swap premiums. We find that the model workswell for...

We consider eight different measures (issued amount, coupon, listed, age, missingprices, price volatility, number of contributors and yield dispersion) to approximate corporatebond liquidity and use a five-variable model to control for maturity, credit and currencydifferences between bonds. The...

We value rating-triggered step-up bonds with three methods: (i) the Jarrow, Lando andTurnbull (1997, JLT) framework, (ii) a similar framework using historical probabilities and(iii) as plain vanilla bonds. We find that the market seems to value single step-up bondsaccording to the JLT model,...