We look at the problem of pricing CoCo bonds where the underlying risky asset dynamics are given by a smile conform model, more precisely an exponential Lévy process incorporating jumps and heavy tails. A core mathematical quantity that is needed in closed form in order to produce an exact...

Contingent Convertibles ("CoCos") are contingent capital instruments which convert into shares, or have a principal write down, if a trigger event takes place. CoCos exhibit the undesirable so-called "death-spiral effect": by actively hedging the equity risk, investors can (unintentionally)...

In this paper we obtain some formulas for pricing contingent convertibles subject to what we call extension risk, i.e., the possibility that bond issuer does not buy back the bond at pre specified call dates and then new coupons rate are established until bond maturity. We follow a structural...

This paper provides a new market implied calibration based on a moment matching methodology where the moments of the risk-neutral density function are inferred from at-the-money and out-the-money European vanilla option quotes. In particular, we derive a model independent risk-neutral formula...

This paper provides a comparison of the exponential copula Lévy model with the classical Gaussian copula model for the pricing of CDO-squared tranches. Several approximations of the recursive approach are considered: a full Monte Carlo approximation, a multivariate Normal approximation of the...

This paper extends the moment matching market implied calibration procedure to Markov models with piecewise constant parameters between successive quoted option maturities. The Markov property allows us to determine the parameter set of each subprocess by a bootstrapping moment matching...