This note addresses the properties of mean-reverting stochastic processes of the Black-Karasinski type with additional stochastic jumps. For these processes, which are well suited for many financial applications such as the modelling of commodity prices and credit spreads, one would usually like...

We review different approaches for measuring the impact of liquidity on CDS prices. We start with reduced form models incorporating liquidity as an additional discount rate. We review Chen, Fabozzi and Sverdlove (2008) and Buhler and Trapp (2006, 2008), adopting different assumptions on how...

We review different theoretical and empirical approaches for measuring the impact of liquidity on CDS prices. We start by reduced form models incorporating liquidity as an additional discount rate. We review Chen, Fabozzi and Sverdlove (2008) and Buhler and Trapp (2006, 2008), adopting different...

A feature of credit markets is the large difference between probabilities of default calculated from historical data and probabilities of default implied from bond prices (or from credit default swaps). This paper illustrates and discusses the reasons for the difference between historical and...

A company's credit default swap spread is the cost per annum for protection against a default by the company. In this paper we analyze data on credit default swap spreads collected by a credit derivatives broker. We first examine the relationship between credit default spreads and bond yields...

In 1976 Black and Cox proposed a structural model where an obligor defaults when the value of its assets hits a certain barrier. In 2001 Zhou showed how the model can be extended to two obligors whose assets are correlated. In this paper we show how the model can be extended to a large number of...

This study investigates the pricing of electricity futures at the European Energy Exchange (EEX) over the period 2002 through 2004. To calculate theoretical contract values, the reduced‐form models of J. J. Lucia and E. S. Schwartz (2002) are used, and a thorough empirical analysis by means of...

Machine learning and its numerous variants have meanwhile become established tools in many areas of society. Several attempts have been made to apply machine learning to the prediction of the outcome of professional sports events and to exploit "inefficiencies" in the corresponding betting...

Quantum computing allows a significant speed-up over traditional CPU- and GPU-based algorithms when applied to particular mathematical challenges such as optimisation and simulation. Despite promising advances and extensive research in hard- and software developments, currently available quantum...