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International Journal of Theoretical and Applied Finance最新文献

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FACTOR COPULA MODEL FOR PORTFOLIO CREDIT RISK 组合信用风险的因子联结模型
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-06-09 DOI: 10.1142/S0219024921500217
Sung Ik Kim, Y. S. Kim
{"title":"FACTOR COPULA MODEL FOR PORTFOLIO CREDIT RISK","authors":"Sung Ik Kim, Y. S. Kim","doi":"10.1142/S0219024921500217","DOIUrl":"https://doi.org/10.1142/S0219024921500217","url":null,"abstract":"A critical aspect in the valuation and risk management of multi-name credit derivatives is the modeling of the dependence among sources of credit risk. The dependence modeling poses difficulties in the pricing of a multi-name credit derivatives, in the estimation of the value-at-risk of a portfolio, or in the pricing of some other basket credit derivative as the description not only on the default arrival in an individual reference entity but on the default dependence among entities in the portfolio should be considered. Although the elliptical models have been widely used due to their mathematical tractability, the dependence modeling using the multi-dimensional Lévy process has shown growing interest among researchers despite its complexity. In this paper, we introduce one factor copula model for portfolio credit risk based on Normal Tempered Stable (NTS) distribution and calibrate the model through 5-year synthetic Collateralized Debt Obligation (CDO) tranche spreads under a large homogeneous portfolio approximation. The calibration results show that the one factor copula model based on NTS distribution is more flexible and provides a dependence structure fitting market CDO tranche spreads. As one of the major applications of the dependence modeling in credit risk, this model shares the advantage of the Gaussian one factor model, and all extensions and implementation methods used for it can be utilized.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-06-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48276725","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
FIRST-TO-DEFAULT AND SECOND-TO-DEFAULT OPTIONS IN MODELS WITH VARIOUS INFORMATION FLOWS 在具有各种信息流的模型中，首选默认选项和第二默认选项
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-06-01 DOI: 10.1142/S0219024921500229
P. Gapeev, M. Jeanblanc
{"title":"FIRST-TO-DEFAULT AND SECOND-TO-DEFAULT OPTIONS IN MODELS WITH VARIOUS INFORMATION FLOWS","authors":"P. Gapeev, M. Jeanblanc","doi":"10.1142/S0219024921500229","DOIUrl":"https://doi.org/10.1142/S0219024921500229","url":null,"abstract":"We continue to study a credit risk model of a financial market introduced recently by the authors, in which the dynamics of intensity rates of two default times are described by linear combinations of three independent geometric Brownian motions. The dynamics of two default-free risky asset prices are modeled by two geometric Brownian motions that are not independent of the ones describing the default intensity rates. We obtain closed form expressions for the no-arbitrage prices of some first-to-default and second-to-default European style contingent claims given the reference filtration initially and progressively enlarged by the two successive default times. The accessible default-free reference filtration is generated by the standard Brownian motions driving the model.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44358704","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
AN ERGODIC BSDE RISK REPRESENTATION IN A JUMP-DIFFUSION FRAMEWORK 跳跃-扩散框架中的遍历侧风险表示
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-05-17 DOI: 10.1142/S0219024921500151
Calisto Guambe, Lesedi Mabitsela, Rodwell Kufakunesu
{"title":"AN ERGODIC BSDE RISK REPRESENTATION IN A JUMP-DIFFUSION FRAMEWORK","authors":"Calisto Guambe, Lesedi Mabitsela, Rodwell Kufakunesu","doi":"10.1142/S0219024921500151","DOIUrl":"https://doi.org/10.1142/S0219024921500151","url":null,"abstract":"We consider the representation of forward entropic risk measures using the theory of ergodic backward stochastic differential equations in a jump-diffusion framework. Our paper can be viewed as an extension of the work considered by Chong et al. (2019) in the diffusion case. We also study the behavior of a forward entropic risk measure under jumps when a financial position is held for a longer maturity.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-05-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41602097","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 1
PRICING AMERICAN OPTIONS WITH THE RUNGE–KUTTA–LEGENDRE FINITE DIFFERENCE SCHEME 用龙格-库塔-勒让德有限差分格式对美式期权定价
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-04-27 DOI: 10.1142/S0219024921500187
Fabien Le Floc’h
{"title":"PRICING AMERICAN OPTIONS WITH THE RUNGE–KUTTA–LEGENDRE FINITE DIFFERENCE SCHEME","authors":"Fabien Le Floc’h","doi":"10.1142/S0219024921500187","DOIUrl":"https://doi.org/10.1142/S0219024921500187","url":null,"abstract":"This paper presents the Runge-Kutta-Legendre finite difference scheme, allowing for an additional shift in its polynomial representation. A short presentation of the stability region, comparatively to the Runge-Kutta-Chebyshev scheme follows. We then explore the problem of pricing American options with the Runge-Kutta-Legendre scheme under the one factor Black-Scholes and the two factor Heston stochastic volatility models, as well as the pricing of butterfly spread and digital options under the uncertain volatility model, where a Hamilton-Jacobi-Bellman partial differential equation needs to be solved. We explore the order of convergence in these problems, as well as the option greeks stability, compared to the literature and popular schemes such as Crank-Nicolson, with Rannacher time-stepping.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-04-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43252987","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 1
ASSET DEPENDENCY STRUCTURES AND PORTFOLIO INSURANCE STRATEGIES 资产依赖结构与投资组合保险策略
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-04-27 DOI: 10.1142/S0219024921500163
Daniel Mantilla-García, Enrique ter Horst, Emilien Audeguil, Germán Molina
{"title":"ASSET DEPENDENCY STRUCTURES AND PORTFOLIO INSURANCE STRATEGIES","authors":"Daniel Mantilla-García, Enrique ter Horst, Emilien Audeguil, Germán Molina","doi":"10.1142/S0219024921500163","DOIUrl":"https://doi.org/10.1142/S0219024921500163","url":null,"abstract":"The estimation of the multiplier parameter of portfolio insurance strategies is crucial for its implementation because it determines the risk exposure to the performance-seeking asset (PSA) at each point in time. Studies that address the estimation of the multiplier’s upper bound have been limited to strategies that use as the safe asset a short-term bank account, in which case the co-movements of the safe and the PSA become irrelevant. However, in several relevant applications, portfolio insurance strategies use stochastic reference assets different from cash, such as the control of active-risk relative to a benchmark, or insuring a minimum level of retirement income. We find that the implications of taking into account the assets’ co-movements in the multiplier estimation can be crucial. In Monte Carlo simulations the multiplier doubles in size across scenarios, and the strategy using the proposed approach presents stochastic dominance over the strategy that ignores the asset dependency structure.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-04-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49362226","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
COHERENT RISK MEASURES AND NORMAL MIXTURE DISTRIBUTIONS WITH APPLICATIONS IN PORTFOLIO OPTIMIZATION 一致风险测度和正态混合分布及其在投资组合优化中的应用
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-04-27 DOI: 10.1142/S0219024921500199
Xiang Shi, Y. S. Kim
{"title":"COHERENT RISK MEASURES AND NORMAL MIXTURE DISTRIBUTIONS WITH APPLICATIONS IN PORTFOLIO OPTIMIZATION","authors":"Xiang Shi, Y. S. Kim","doi":"10.1142/S0219024921500199","DOIUrl":"https://doi.org/10.1142/S0219024921500199","url":null,"abstract":"This paper investigates the coherent risk measure of a class of normal mixture distributions which are widely-used in finance. The main result shows that the mean-risk portfolio optimization problem with these normal mixture distributions can be reduced to a quadratic programming problem which has closed form of solution by fixing the location parameter and skewness parameter. In addition, we show that the efficient frontier of the portfolio optimization problem can be extended to three dimensions in this case. The worst-case value-at-risk in the robust portfolio optimization can also be calculated directly. Finally, the conditional value-at-risk (CVaR) is considered as an example of coherent risk measure. We obtain the marginal contribution to risk for a portfolio based on the normal mixture model.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-04-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44271575","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 4
FROM BID-ASK CREDIT DEFAULT SWAP QUOTES TO RISK-NEUTRAL DEFAULT PROBABILITIES USING DISTORTED EXPECTATIONS 从投标即信用违约掉期报价到使用扭曲预期的风险中性违约概率
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-04-27 DOI: 10.1142/S0219024921500175
Matteo Michielon, A. Khedher, P. Spreij
{"title":"FROM BID-ASK CREDIT DEFAULT SWAP QUOTES TO RISK-NEUTRAL DEFAULT PROBABILITIES USING DISTORTED EXPECTATIONS","authors":"Matteo Michielon, A. Khedher, P. Spreij","doi":"10.1142/S0219024921500175","DOIUrl":"https://doi.org/10.1142/S0219024921500175","url":null,"abstract":"Risk-neutral default probabilities can be implied from credit default swap (CDS) market quotes. In practice, mid-CDS quotes are used as inputs, as their risk-neutral counterparts are not observable. We show how to imply risk-neutral default probabilities from bid and ask quotes directly by means of formulating the CDS calibration problem to bid and ask market quotes within the conic finance framework. Assuming the risk-neutral distribution of the default time to be driven by a Poisson process we prove, under mild liquidity-related assumptions, that the calibration problem admits a unique solution that also allows to jointly calculate the implied liquidity of the market.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-04-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47061137","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 3
Pricing Asian Options with Correlators 亚洲期权与相关定价
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-04-23 DOI: 10.1142/s0219024921500412
Silvia Lavagnini
{"title":"Pricing Asian Options with Correlators","authors":"Silvia Lavagnini","doi":"10.1142/s0219024921500412","DOIUrl":"https://doi.org/10.1142/s0219024921500412","url":null,"abstract":"We derive a series expansion by Hermite polynomials for the price of an arithmetic Asian option. This series requires the computation of moments and correlators of the underlying price process, but for a polynomial jump-diffusion, these are given in closed form, hence no numerical simulation is required to evaluate the series. This allows, for example, for the explicit computation of Greeks. The weight function defining the Hermite polynomials is a Gaussian density with scale b. We find that the rate of convergence for the series depends on b, for which we prove a lower bound to guarantee convergence. Numerical examples show that the series expansion is accurate but unstable for initial values of the underlying process far from zero, mainly due to rounding errors.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-04-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43199184","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Approximate option pricing formula for Barndorff-Nielsen and Shephard model Barndorff-Nielsen和Shephard模型的近似期权定价公式
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-04-22 DOI: 10.1142/s021902492250008x
Takuji Arai
{"title":"Approximate option pricing formula for Barndorff-Nielsen and Shephard model","authors":"Takuji Arai","doi":"10.1142/s021902492250008x","DOIUrl":"https://doi.org/10.1142/s021902492250008x","url":null,"abstract":"For the Barndorff-Nielsen and Shephard model, we present approximate expressions of call option prices based on the decomposition formula developed by Arai [3]. Besides, some numerical experiments are also implemented to make sure how effective our approximations are.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-04-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46420864","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
FINANCING AND INVESTMENT STRATEGIES UNDER CREDITOR-MAXIMIZED LIQUIDATION 债权人最大化清算下的融资与投资策略
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-03-30 DOI: 10.1142/S0219024921500138
T. Shibata, M. Nishihara
{"title":"FINANCING AND INVESTMENT STRATEGIES UNDER CREDITOR-MAXIMIZED LIQUIDATION","authors":"T. Shibata, M. Nishihara","doi":"10.1142/S0219024921500138","DOIUrl":"https://doi.org/10.1142/S0219024921500138","url":null,"abstract":"We develop a contingent claim model to examine the interaction between financing and investment where equity holders decide when to default and debt holders decide when to liquidate as well as maximize the liquidation value. We show that if the debt holders maximize the residual value at liquidation, an increase in liquidation value increases the amount of debt issuance and investment quantity ex ante, delaying corporate investment. This relationship is based on the fact that an increase in the liquidation value decreases the credit spread of debt holders. These results fit well with those of existing empirical studies.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-03-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45403869","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
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