A pricing model for secondary market yield based floating rate notes subject to default risk

2001 ◽  
Vol 135 (2) ◽  
pp. 233-248
Author(s):  
Manfred Frühwirth
Keyword(s):  
Default Risk ◽  
Secondary Market ◽  
Pricing Model ◽  
Floating Rate

scholarly journals Testing For Weak-Level Efficiency In The Secondary Market For Developing Country Debt

2011 ◽  
Vol 11 (1) ◽  
pp. 73
Author(s):  
Thomas J. Webster
Keyword(s):  
Developing Country ◽  
Default Risk ◽  
Secondary Market ◽  
Trading Rule ◽  
Brady Plan ◽  
Arima Processes

This paper investigates the presence of weak level efficiency in the secondary market for developing country debt y modeling as ARIMA processes debt price variations of eight large debtor countries that were actively traded during the period January 1986 to December 1992. The analysis suggests that in some cases the secondary market for developing-country debt was weakly inefficient and that there existed at least one trading rule capable of generating above-average returns. Moreover, the narrowing of above-average returns in the period following the announcement of the Brady Plan suggests that the secondary market for developing country debit became more efficient, possibly due to a reduction in default risk and an increase in the availability of timely investment information.

PRICING PARTICIPATING POLICIES WITH RATE GUARANTEES

2006 ◽  
Vol 09 (04) ◽  
pp. 517-532 ◽  
Author(s):  
CHI CHIU CHU ◽  
YUE KUEN KWOK
Keyword(s):  
Interest Rate ◽  
Default Risk ◽  
Contingent Claims ◽  
Analytic Approximation ◽  
Perturbation Techniques ◽  
Pricing Model ◽  
Investment Portfolio ◽  
Pricing Models ◽  
Approximation Solution ◽  
The Interest Rate

We construct the contingent claims models that price participating policies with rate guarantees and default risk. These policies are characterized by the sharing of profits from an investment portfolio between the insurer and the policyholders. A certain reserve distribution mechanism is employed to credit interest at or above certain specified guaranteed rate periodically to the policyholders. Besides the reversionary reserve distribution, terminal bonus is also paid to the policyholders if the terminal surplus is positive. However, the insurer may default at maturity and the policyholders can only receive the residual assets. By neglecting market frictions, mortality risk and surrender option, and under certain assumptions on the interest rate crediting mechanism, we are able to find analytic approximation solution to the pricing model using perturbation techniques. We also develop effective finite difference algorithms for the numerical solution of the contingent claims models. Pricing behaviors of these participating policies with respect to various parameters in the pricing models are examined.

scholarly journals Sovereign Default Risk and the U.S. Equity Market

2017 ◽  
Vol 52 (1) ◽  
pp. 305-339 ◽  
Author(s):  
Alexandre Jeanneret
Keyword(s):  
Financial Distress ◽  
Default Risk ◽  
Equity Market ◽  
Sovereign Default ◽  
Economic Conditions ◽  
Pricing Model ◽  
Equity Prices ◽  
Asset Pricing Model ◽  
Sovereign Default Risk ◽  
Sovereign Credit Risk

This paper develops a two-country asset pricing model with defaultable firms and governments. This model shows that higher sovereign credit risk in a country depresses equity prices internationally and increases their volatility. The effect is strongest during adverse economic conditions and when firms are close to financial distress. A structural estimation provides evidence that sovereign default risk in Europe affects European and U.S. stock markets through the threat of an economic slowdown.

scholarly journals Pricing model of interest rate swap with a bilateral default risk

2010 ◽  
Vol 234 (2) ◽  
pp. 512-517 ◽  
Author(s):  
Xiaofeng Yang ◽  
Jinping Yu ◽  
Shenghong Li ◽  
Albert Jerry Cristoforo ◽  
Xiaohu Yang
Keyword(s):  
Interest Rate ◽  
Default Risk ◽  
Pricing Model ◽  
Interest Rate Swap ◽  
Rate Swap

scholarly journals The Pricing of Double Trigger Catastrophe Put Option with Default Risk

2020 ◽  
pp. 38-50
Author(s):  
Linzhi Jiao ◽  
Zhenhua Bao
Keyword(s):  
Numerical Analysis ◽  
Option Pricing ◽  
Default Risk ◽  
Rate Process ◽  
Pricing Model ◽  
Put Option ◽  
Option Pricing Model ◽  
The Interest Rate ◽  
Value Changes ◽  
Coupon Bond

This study was present a catastrophe put option pricing model that considers default risk. The default of the option issuer can occur at any time before the maturity, and there is a correlation between the total assets of the option issuer, the underlying stock and the zero coupon bond. The explicit solution of option pricing is obtained when the interest rate process follows the Vasicek model and relevant proofs are given. Finally, the value changes under different parameters are discussed through a numerical analysis.

Sign in / Sign up

Export Citation Format

Share Document