This paper develops a model to value defaultable bonds in emerging markets. Default occurs when some signaling process hits a pre-defined default barrier. The signaling variable is considered to be some macro-economic variables such as foreign exchange rates. The dynamics of the default barrier...

This paper develops a simple model based on an options approach to measure provisions covering expected losses of collateralised retail lending due to default. The measurement of provisions against expected losses of retail lending secured by collateral is important for improving the capital...

This paper develops a barrier-option pricing model in which the exchange rate follows a mean-reverting lognormal process. The corresponding closed-form solutions for the barrier options with time-dependent barriers are derived. The numerical results show that barrier option values and the...

This paper extends the stationary-leverage-ratio model to incorporate a time-dependent target leverage ratio. The theoretical hypothesis of the existence of a time-dependent target leverage ratio reflects the movement of a firm's initial target ratio toward a long-term target ratio over time....

In this paper, we comment on the paper quot;Pricing Double Barrier Options using Laplace Transformsquot; by Antoon Pelsser. We illustrate that the same solutions of double barrier option values in terms of Fourier sine series can be obtained by using both Laplace transform and the method of...

The theoretical prediction on targeted exchange rates expects mean reversion of the exchange rates. There is some empirical evidence to support this prediction. This paper presents a model for valuing European foreign exchange options in which the forward foreign exchange rate follows a...

Despite Krugman's (1991) model being a benchmark for modelling target zones, empirical support has been sparse due to the subtle non-linear relationship between the observable exchange rate and underlying unobservable fundamental. This paper provides an alternative approach to derive explicit...

On August 11, 2015, China revamped its procedure for setting the official central parity of the renminbi (RMB) against the US dollar. Our empirical investigation suggests that the intertemporal dynamics of China's central parity shifted after this policy change, though the deviation of the RMB...

Using data on Brazil, Colombia, Mexico, the Philippines, Russia and Turkey, our empirical results show that the exchange rates of their currencies have adequate explanatory power in explaining their US dollar-denominated sovereign bonds, particularly in the post-global financial crisis period....

Although the affine Gaussian term-structure model has been a workhorse model in termstructuremodelling, it remains doubtful whether it is an appropriate model in a low interest rate environment. This paper uses an alternative quadratic Gaussian-term structure model which is well known to be as...