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Hybrid products with Credit Risk
  • Coco Bonds Valuation with Equity- and Credit-Calibrated First Passage Structural Models After the beginning of the credit and liquidity crisis, financial institutions have been considering creating a convertible-bond type contract focusing on Capital. Under the terms of this contract, a bond is converted into equity if the authorities deem the institution to be under-capitalized. This paper discusses this Contingent Capital (or Coco) bond instrument and presents a pricing methodology based on firm value models. The model is calibrated to readily available market data. A stress test of model parameters is illustrated to account for potential model risk. Finally, a brief overview of how the instrument performs is presented. , Damiano Brigo, Joao Garcia, Nicola Pede (2013)
  • A Novel Simple But Empirically Consistent Model for Stock Price and Option Pricing In this paper, we propose a novel simple but empirically very consistent stochastic model for stock price dynamics and option pricing, which not only has the same analyticity as log-normal and Black-Scholes model, but can also capture and explain all the main puzzles and phenomenons arising from empirical stock and option markets which log-normal and Black-Scholes model fail to explain. In addition, this model and its parameters have clear economic interpretations. Large sample empirical calibration and tests are performed and show strong empirical consistency with our model s assumption and implication. Immediate applications on risk management, equity and option evaluation and trading, etc are also presented. , H. Pang (2009)
  • Time Changed Markov Processes in UnifiedCredit-Equity Modeling , P. Carr, V. Linetsky, R. Mendoza (2007)
  • Hybrid Pricing This report presents different hybrid models and their application to the pricing of exotic products. A Market Model combining a risk-free term structure and a defaultable one for one underlying is first developped, with the application to the pricing of some exotic products, especially designed for the hedging needs of pension funds (1). Recalling the basis of the underlying HJM model (2) will then give us the possibility to extend some results to the modelling of the credit migration process (3), and to a multi-name framework (4). Along the lines, some links with Equity diffusions are covered. , S.Roland, L.Viet, M.Ciuca, E.Benhamou (2006)
  • Pricing Equity Derivatives Subject to Bankruptcy , V. Linetsky (2006)
  • The Influence of FX Risk on Credit Spreads , P.J.Schonbucher, P.Ehlers (2006)
  • Robust Replication of Default Contingent Claims , P. Carr, B. Flesaker (2006)
  • Merton?s Model, Credit Risk, and Volatility Skews , J.Hull, A.White, I.Nelken (2004)





















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