This article establishes efficient lattice algorithms for pricing American interest-sensitive claims in the Heath, Jarrow, Morton paradigm, under the assumption that the volatility structure of forward rates is restricted to a class that permits a Markovian representation of the term structure....

Most models of deposit insurance assume that the volatility of a bank's assets is exogenously provided. Although this framework allows the impact of volatility on bankruptcy costs and deposit insurance subsidies to be explored, it is static and does not incorporate the fact that equityholders...

Most models of deposit insurance assume that the volatility of a bank's assets is exogenously provided. Although this framework allows the impact of volatility on bankruptcy costs and deposit insurance subsidies to be explored, it is static and does not incorporate the fact that equityholders...

Studies of the sensitivity of the prices of interest rate claims to alternative specifications of the volatility of spot and forward interest rates have drawn different conclusions. One possible explanation for this is that it is difficult to adjust the volatility structure without disturbing...

This paper considers the pricing of options when there are jumps in the pricing kernel and correlated jumps in asset returns and volatilities. Our model nests Duan's GARCH option models, where conditional returns are constrained to being normal, as well as mixed jump processes as used in Merton....

Recent advances in asset pricing - the reduced form approach to pricing risk debt and derivatives - are used to quantitatively evaluate several proposals for mandatory bank issue of subordinated debt. We find that credit spreads on both fixed and floating rate subordinated debt provide...

Recent advances in asset pricing - the reduced-form approach to pricing risky debt and derivatives - are used to quantitatively evaluate several proposals for mandatory bank issue of subordinated debt. We find that credit spreads on both fixed- and floating-rate subordinated debt provide...

Models for pricing interest rate claims, developed under the Heath-Jarrow-Morton paradigm, differ according to the volatility structure imposed on forward rates. For most general HJM structures the resultant path dependence creates implementation problems. Ritchken and Sankarasubramanian have...