With the recent significant growth in the single-name credit default swap (CDS) market has come the need for accurate and computationally efficient models to value these instruments. While the model developed by Duffie, Pan, and Singleton (2000) can be used, the solution is numerical (solving a...

This paper provides closed form solutions for futures and European futures options on pure discount bonds under the Ornstein-Uhlenbeck (normal) process. A significant difference between Black's model (1976) and the model in this paper for futures options is discussed.

Credit derivatives are among the fastest growing contracts in the derivatives market. We present a simple, easily implementable model to study the pricing and hedging of two widely traded default-triggered claims: default swaps and default baskets. In particular, we demonstrate how default...

American options require numerical methods, namely lattice models, to provide accurate price estimates. The computations can become expensive when more than one state variable is involved. Analytical upper bounds can therefore provide a useful guideline for how high American values can reach. In...

This paper extends the seminal Cox-Ross-Rubinstein ((1979), CRR hereafter) binomial model to multiple assets. It differs from previous models in that it is derived under the complete market environment specified by Duffie and Huang (1985) and He (1990).

Empirical studies and much marketplace opinion have it that the spread between private money market rates and the U.S. Treasury bill rate of comparable maturity is due to differential default risk, liquidity risk, and relative supplies. This paper presents an argument and empirical evidence that...