This paper addresses whether credit rating downgrades feed back on the asset value of the downgraded companies, causing real losses. To investigate this issue we construct a structural credit risk model incorporating ratings and the feedback loss. To estimate the parameters of the model we...

The stock price is assumed to follow a jump-diffusion process which may exhibit time-varying volatilities. An econometric technique is then developed for this model and applied to high-frequency time series of stock prices that are subject to microstructure noises. Our method is based on first...

The stock price is assumed to follow a jump-diffusion process which may exhibit time-varying volatilities. An econometric technique is then developed for this model and applied to high-frequency time series of stock prices that are subject to microstructure noises. Our method is based on first...

Recent literature has pointed out that information asymmetries may be the reason for the poor performance of structural credit risk models to fit corporate bond data. It is well known in fact that these models lead to a strong understatement of the credit spread terms structure, particularly on...

Recent literature has pointed out that information asymmetries may be the reason for the poor performance of structural credit risk models to fit corporate bond data. It is well known in fact that these models lead to a strong understatement of the credit spread terms structure, particularly on...

This paper shows how one can compute option prices from a Bayesian inference viewpoint, using an econometric model for the dynamics of the return and of the volatility of the underlying asset. The proposed evaluation of an option is the predictive expectation of its payoff function. The...