We start by presenting a reduced-form multiple default type of model and derive abstract results on the influence of a state variable X on credit spreads, when both the intensity and the loss quota distribution are driven by X. The aim is to apply the results to a concrete real life situation,...

We start by presenting a reduced-form multiple default type of model and derive abstract results on the influence of a state variable X on credit spreads, when both the intensity and the loss quota distribution are driven by X. The aim is to apply the results to a concrete real life situation,...

In this paper we discuss the significant computational simplification that occurs when option pricing is approached through the change of numeraire technique. The original impetus was a recently published paper (Hoang, Powell, Shi 1999) on endowment options; in the present paper we extend these...

We consider an incomplete market in the form of a multidimensional Markovian factor model, driven by a general marked point process (representing discrete jump events) as well as by a standard multidimensional Wiener process. Within this framework we study arbitrage free good deal pricing bounds...

The timing option embedded in a futures contract allows the short position to decide when to deliver the underlying asset during the last month of the contract period. In this paper we derive, within a very general incomplete market framework, an explicit model independent formula for the...

We develop a structural bond pricing approach and implement it on a large panel of US industrial bonds using an efficient maximum likelihood methodology. We evaluate the model's ability to predict yield spread levels and changes out-of-sample. Errors are smaller and distinctly less variable than...

In this paper we discuss the pricing of commercial real estate index linked swaps (CREILS). This particular pricing problem has been studied by Buttimer et al. (1997) in a previous paper. We show that their results are only approximately correct and that the true theoretical price of the swap is...

In this paper we introduce the Smooth Permanent Surge [SPS] model. The model is an integrated non lineal moving average process with possibly unit roots in the moving average coefficients. The process nests the Stochastic Permanent Break [STOPBREAK] process by Engle and Smith (1999) and in a...

We show how it is possible to generate multivariate data which have moments arbitrary close to the desired ones. They are generated as linear combinations of variables with known theoretical moments. It is shown how to derive the weights of the linear combinations in both the univariate and the...

The detection of structural change and determination of lag lengths are long-standing issues in time series analysis. This paper demonstrates how these can be successfully married in a Bayesian analysis. By taking account of the inherent uncertainty about the lag length when deciding on the...