We propose a structural model with a joint process of tangible assets (marker) and firm status for the pricing of corporate securities. The firm status is assumed to be latent or unobservable, and default occurs when the firm status process reaches a default threshold at the first time. The...

We propose a structural model with a joint process of tangible assets (marker) and firm status for the pricing of corporate securities. The firm status is assumed to be latent or unobservable, and default occurs when the firm status process reaches a default threshold at the first time. The...

This paper proposes a new pricing model for corporate securities issued by a levered firm with the possibility of debt renegotiation. We take the structural approach that the firm's earnings follow a geometric Brownian motion with stochastic collaterals. While equity holders can default the firm...

We consider a consistent pricing model of government bonds, interest-rate swaps and basis swaps in one currency within the no-arbitrage framework. To this end, we propose a three yield-curve model, one for discounting cash flows, one for calculating LIBOR deposit rates and one for calculating...

With the introduction of the international accounting standards in Europe and dissemination of LDI (Liability Driven Investment) as a new investment standard, the investor demand for super-long end has been rising also in Japan. Under these circumstances, it is required that the Japanese...

This book consists of 11 papers based on research presented at the KIER-TMU International Workshop on Financial Engineering, held in Tokyo in 2009. The Workshop, organised by Kyoto University's Institute of Economic Research (KIER) and Tokyo Metropolitan University (TMU), is the successor to the...

The stochastic volatility model of Heston (Rev Financ Stud 6(2):327–343, <CitationRef CitationID="CR19">1993</CitationRef>) has found difficulty in describing some of the important features of implied volatility dynamics, leading to a quest for multifactor extensions as well as the incorporation of time-dependent model parameters. In...</citationref>

We present a framework of heterogeneous yield curves of agents based on the pricing kernel approach in order to model LIBOR and basis swap rates. Each yield curve may imply different prices of assets but is consistent with swap rates, basis swap rates and foreign exchange rates. We show three...

The purpose of this paper is to demonstrate the powerful and flexible applicability of the Gram-Charlier expansion to pricing of a wide variety of interest rate related products involving interest rate risk and credit risk. In this paper, we develop easily implemented approximations of the...

This paper shows that a market price of nominal risk plays an important role in the determinacy of the price of money under a stochastic continuous-time monetary economy. It is presented that a sufficient condition for the determinacy of the price of money is either an exogenously given nominal...