This paper analyzes how combining firms into either groups or conglomerates affects their credit standing, as measured by their de- fault probabilities, recovery rates and credit spreads. Each combina- tion offers protection against default to its affiliates, and issues debt to optimize the...

We study and calibrate a cohort-based model which captures the characteristics of a mortality surface with a parsimonious, continuous-time factor approach. The model allows for imperfect correlation of the mortality intensity across generations. It is implemented on UK data for the period...

Probability statements about future evolutions of financial and actuarial risks are expressed in terms of the ‘real-world’ probability measure P, whereas in an arbitrage-free environment, the prices of these traded risks can be expressed in terms of an equivalent martingale measure Q. The...

On average, the role of export-credit operations (ECOs) in the Brazilian economy has been modest: during the 1985-89 period they involved only 2.57 per cent of total Brazilian imports, highly concentrated in "equipment" (excluding transport, but including government services), "cereals" and...

Purpose – The implementation of credit risk models has largely relied either on the use of historical default dependence, as proxied by the correlation of equity returns, or on risk neutral equicorrelation, as extracted from CDOs. Contrary to both approaches, the purpose of this paper is to...

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

This paper explores the dynamic dependence properties of a Levy process, the Variance Gamma, which has non Gaussian marginal features and non Gaussian dependence. In a static context, such a non Gaussian dependence should be represented via copulas. Copulas, however, are not able to capture the...

Time-changed Brownian motions are extensively applied as mathematical models for asset returns in Finance. Time change is interpreted as a switch to trade-related business time, different from calendar time. Time-changed Brownian motions can be generated by infinite divisible normal mixtures....

This paper characterizes optimal intercorporate guarantees, under the classical trade-off between bankruptcy costs and taxation. Conditional guarantees, allowing the guarantor - or Holding company - to maintain limited liability vis-a-vis the beneficiary - or Subsidiary - maximize joint value....

The traditional multivariate Lévy process constructed by subordinating a Brownian motion through a univariate subordinator presents a number of drawbacks, including the lack of independence and a limited range of dependence. In order to face these, we investigate multivariate subordination,...