In this paper we apply a copula function pricing technique to the evaluation of vulnerable options, i.e. options with counterpart risk. Using copulas enables to separate the specification of marginal distributions and the dependence structure of the events of exercise of the option and default...

Stochastic mortality, i.e. modelling death arrival via a jump process with stochastic intensity, is gaining an increasing reputation as a way to represent mortality risk. This paper is a first attempt to model the mortality risk of couples of individuals, according to the stochastic intensity...

This paper explores the relationship between optimal leverage and credit risk under ownership links. It develops a structural model of a parent and a subsidiary, which issues debt in its own name under a guarantee by the parent. We find that zero leverage can be optimal for the guarantor, while...

Copula functions have proven to be extremely useful in describing joint default and survival probabilities in credit risk applications. We overview the state of the art and point out some open modelling issues. We discuss first joint default modelling in diffusion based structural models, then...

The most common approach for default dependence modelling is at present copula functions. Within this framework, the paper examines factor copulas, which are the industry standard, together with their latest development, namely the incorporation of sudden jumps to default instead of a pure...

In this note we use doubly stochastic processes (or Cox processes) in order to model the evolution of the stochastic force of mortality of an individual aged x. These processes have been widely used in the credit risk literature in modelling the default arrival, and in this context have proved...

The paper illustrates the efficiency features of the Italian banking system through a review of the most important empirical studies over the last fifteen years. Particular emphasis is given to DEA (dynamic envelopment analysis) studies and to their capability to investigate economies of scale...

Structural models of credit risk are known to present vanishing spreads at very short maturities. This shortcoming, which is due to the diffusive behavior assumed for asset values, can be circumvented by considering discontinuities of the jump type in their evolution over time. In particular,...