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1.
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 depend on the volatility and the drift of the signaling variable. We derive a closed-form solution of the defaultable bond price from the model as a function of a signaling variable and a short-term interest rate. The numerical results show that the model values generated by using foreign exchange rates as the signaling variables can broadly track the market credit spreads of defaultable bonds in South Korea and Brazil. Given an expected level of the foreign exchange rate, defaultable bond values under a stressed market situation can be obtained. 相似文献
2.
Emilio Barone Giovanni Barone-Adesi & Antonio Castagna 《European Financial Management》1998,4(2):231-282
The pricing of bonds and bond options with default risk is analysed in the general equilibrium model of Cox, Ingersoll, and Ross (1985). This model is extended by means of an additional parameter in order to deal with financial and credit risk simultaneously. The estimation of such a parameter, which can be considered as the market equivalent of an agencies' bond rating, allows to extract from current quotes the market perceptions of firm's credit risk. The general pricing model for defaultable zero-coupon bond is first derived in a simple discrete-time setting and then in continuous-time. The availability of an integrated model allows for the pricing of default-free options written on defaultable bonds and of vulnerable options written either on default-free bonds or defaultable bonds. A comparison between our results and those given by Jarrow and Turnbull (1995) is also presented. 相似文献
3.
Koichi Matsumoto 《Asia-Pacific Financial Markets》2003,10(2-3):129-149
Recently many kinds of credit derivatives are traded in the market. The default probability implied in the market becomes important to price some credit derivatives. Also it is useful for managing the credit risk because it includes the market information. In this paper we show how to calculate the implied default probability in the default swap market or the defaultable bond market.This paper is developed from author’s master thesis (Matsumoto, 2000), Graduate School of Systems Management, the University of Tsukuba. 相似文献
4.
We provide a concise exposition of theoretical results that appear in modeling default time as a random time, we study in details the invariance martingale property and we establish a representation theorem which leads, in a complete market setting, to the hedging portfolio of a vulnerable claim. Our main result is that, to hedge a defaultable claim one has to invest the value of this contingent claim in the defaultable zero-coupon.Received: April 2003Mathematics Subject Classification:
91B24, 91B29, 60G46JEL Classification:
G10The authors would like to thank D. Becherer and J.N. Hugonnier for interesting discussions and the anonymous referee whose pertinent questions on the first version of this paper help them to clarify the proofs. All remaining errors are ours. 相似文献
5.
Term structure modelling of defaultable bonds 总被引:2,自引:0,他引:2
Philipp J. Schönbucher 《Review of Derivatives Research》1998,2(2-3):161-192
In this paper we present a model of the development of the term structure of defaultable interest rates that is based on a multiple-defaults model. Instead of modelling a cash payoff in default we assume that defaulted debt is restructured and continues to be traded.The term structure of defaultable bond prices is represented in terms of defaultable forward rates similar to the Heath-Jarrow-Morton (HJM) (Heath et al., 1992) approach, and conditions are given under which the dynamics of these rates are arbitrage-free. These conditions are a drift restriction that is closely related to the HJM drift restriction for risk-free bonds, and the restriction that the defaultable short rate must always be not below the risk-free short rate. In its most general version the model is set in a marked point process framework, to allow for jumps in the defaultable rates at times of default.Financial Assistance by Deutsche Forschungsgemeinschaft, Sonderforschungsbereich 303, at the University of Bonn and the DAAD is gratefully acknowledged.I thank Pierre Mella-Barral, David Lando and David Webb for helpful conversations, and the participants of the FMG Conference on Defaultable Bonds (March 1997) in London and the QMF 97 conference in Cairns for helpful comments. All errors are of course my own. 相似文献
6.
Nicola Bruti-Liberati Christina Nikitopoulos-Sklibosios Eckhard Platen Erik Schlögl 《Asia-Pacific Financial Markets》2009,16(1):1-31
The objective of this paper is to consider defaultable term structure models in a general setting beyond standard risk-neutral
models. Using as numeraire the growth optimal portfolio, defaultable interest rate derivatives are priced under the real-world
probability measure. Therefore, the existence of an equivalent risk-neutral probability measure is not required. In particular,
the real-world dynamics of the instantaneous defaultable forward rates under a jump-diffusion extension of a HJM type framework
are derived. Thus, by establishing a modelling framework fully under the real-world probability measure, the challenge of
reconciling real-world and risk-neutral probabilities of default is deliberately avoided, which provides significant extra
modelling freedom. In addition, for certain volatility specifications, finite dimensional Markovian defaultable term structure
models are derived. The paper also demonstrates an alternative defaultable term structure model. It provides tractable expressions
for the prices of defaultable derivatives under the assumption of independence between the discounted growth optimal portfolio
and the default-adjusted short rate. These expressions are then used in a more general model as control variates for Monte
Carlo simulations of credit derivatives.
Nicola Bruti-Liberati: In memory of our beloved friend and colleague. 相似文献
7.
In this paper we derive a closed-form solution for a representative investor who optimally allocates her wealth among the
following securities: a credit-risky asset, a default-free bank account, and a stock. Although the inclusion of a credit-related
financial product in the portfolio selection is more realistic, no closed-form solutions to date are given in the literature
when a recovery value is considered in the event of a default. While most authors have assumed some recovery scheme in their
initial model set up, they do not address the portfolio problem with a recovery when a default actually occurs. Given the
tractability of the recovery of market value, we solved the optimal portfolio problem for the representative investor whose
utility function is a Constant Relative Risk Aversion utility function.
We find that the investor will allocate larger fraction of wealth to the defaultable security as long as the default-event
risk is priced. These results are very intuitive and reasonable since it indicates that if the default risk premium is not
priced properly the investor purchases less defaultable securities. 相似文献
8.
This paper presents a PDE approach in a Markovian setting to hedge defaultable derivatives. The arbitrage price and the hedging strategy for an attainable contingent claim are described in terms of solutions of a pair of coupled PDEs. For some standard examples of defaultable claims, we provide explicit formulae for prices and hedging strategies. 相似文献
9.
This paper argues that in the fundamental subject of financialrisk analysis, some valuable lessons may be drawn from insurance.The probability of ruin, defined as a first passage time, carriesa dynamic element whose absence in Value at Risk is one liability,among others. Extreme value theory, which has been successfullyapplied to insurance shortly after it was introduced in probability,may offer a coherent framework for analyzing the extreme movessuch as the ones observed in recent foreign exchange and financialcrises. Lastly, we show that the genuine hazards generated byglobal capital markets and illustrated by the events of summer1998, generate a market incompleteness that existing modelsof defaultable bonds do not fully address. In contrast, thelong experience of risk premium analysis in the insurance andreinsurance industry, as well as the existence of historicaldata on natural disasters, render the valuation of catastrophebonds less perilous than that of defaultable bonds. 相似文献
10.
Rossella Agliardi 《Quantitative Finance》2013,13(5):749-762
An exact valuation formula for defaultable corporate coupon bonds is proved. The model incorporates discrete coupons, bankruptcy costs, taxes and the market risk generated by a stochastic risk-free structure. The aim of this paper is twofold: first, we generalise previous pricing models for corporate bonds; second, we provide a comprehensive formula in order to properly disentangle the contribution of several risk factors to credit spreads. 相似文献