In this paper, we assume that the log return of the underlying asset follows a semi-Markov process, then from the knowledge of the kernel we derive an explicit expression for the value of the option and for the bare risk in the case of the European call (put) option and, by means of a recursive...

This paper presents a duration dependent model for analyzing the evolution of credit ratings. It considers the backward recurrence process to tackle the time of permanence problem in the rating classes. In this way it is possible to manage the duration effects, which represent one of the most...