A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
Study finds it hard to establish common factor pricing in corporate bonds.
The VIX is used to model corporate bond volatility and returns.
Corporate bond factor research is flawed due to measurement errors and ex-post filtering.
Develops a new model to better predict corporate bond yields.
QCML improves bond similarity learning in illiquid markets.
This paper uses RL to optimize bid-ask spreads for illiquid corporate bonds.
The paper uses option theory to estimate corporate bond liquidity spreads.
Model for corporate bond pricing with credit rating migration, solving a double free boundary problem.
The electronic platform has been increasingly popular for executing large corporate bond orders by asset managers, who in turn have to assess the quality of their executions via Transaction Cost Analysis (TCA). One of the challenges in TCA is to build a realistic benchmark for the expected transaction cost and to chara…
A study finds that only a few factors explain corporate bond risk, rendering extensive bond factor literature redundant.
We propose an option approach for pricing bond illiquidity that is reminiscent of the celebrated work of Longstaff (1995) on the non-marketability of some non-dividend-paying shares in IPOs. This approach describes a quite common situation in the fixed income market: it is rather usual to find issuers that, besides liq…
Paper finds political networks reduce bond issuance costs in China.
A new method estimates corporate bond defaults in financial networks efficiently.
Model predicts OTC dealers' trading behavior using historical data.
We study the pricing problem for corporate defaultable bond from the viewpoint of the investors outside the firm that could not exactly know about the information of the firm. We consider the problem for pricing of corporate defaultable bond in the case when the firm value is only declared in some fixed discrete time a…
The paper uses daily bond price data to estimate corporate default spreads, improving credit risk assessment.
For the last two decades, most financial markets have undergone an evolution toward electronification. The market for corporate bonds is one of the last major financial markets to follow this unavoidable path. Traditionally quote-driven i.e., dealer-driven) rather than order-driven, the market for corporate bonds is st…
Paper proposes a supervised similarity framework for corporate bonds using RF proximities.
Research explores how local communities and corporations interact in finance.
We derive simple return models for several classes of bond portfolios. With only one or two risk factors our models are able to explain most of the return variations in portfolios of fixed rate government bonds, inflation linked government bonds and investment grade corporate bonds. The underlying risk factors have nat…
This paper develops a two-dimensional structural framework for valuing credit default swaps and corporate bonds in the presence of default contagion. Modelling the values of related firms as correlated geometric Brownian motions with exponential default barriers, analytical formulae are obtained for both credit default…
In most illiquid markets, there is no obvious proxy for the market price of an asset. The European corporate bond market is an archetypal example of such an illiquid market where mid-prices can only be estimated with a statistical model. In this OTC market, dealers / market makers only have access, indeed, to partial i…
This paper investigates the presence of long memory in corporate bond and stock indices of six European Union countries from July 1998 to February 2015. We compute the Hurst exponent by means of the DFA method and using a sliding window in order to measure long range dependence. We detect that Hurst exponents behave di…
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Under fairly general assumptions for the distribution of the total net assets of a set of firms we show that retaining the first few moments of the por…
Conditions of Stability for explicit finite difference scheme and some results of numerical analysis for a unified 2 factor model of structural and reduced form types for corporate bonds with fixed discrete coupon are provided. It seems to be difficult to get solution formula for PDE model which generalizes Agliardi's …
The process of liquidity provision in financial markets can result in prolonged exposure to illiquid instruments for market makers. In this case, where a proprietary position is not desired, pro-actively targeting the right client who is likely to be interested can be an effective means to offset this position, rather …
I explain the root of persistent failure of efforts to remove tax-induced distortions of economic incentives. It lies in FUNDAMENTAL IMPOSSIBILITY of objectively evaluating tax base. Distortions can be entirely avoided in the sector of publicly traded corporations. Evaluation can be bypassed by taxing it in shares (to …
Emerging market hard-currency bonds are an asset class of growing importance, and contain exposure to an EM sovereign and the underlying industry. The authors investigate how to model this as a modification of the well-known first-to-default (FtD) basket, using the structural model, and find the approach feasible.
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Using a multivariate normal Copula function for the joint default probabilities we show that retaining the first few moments of the portfolio default l…
We derive a closed-form formula for computing bond prices between coupon payments. Our results cover both the `Treasury' and the `Street' pricing methods used by sovereign and corporate issuers. We apply our formulas to two UK gilts, the 8% Treasury Gilt 2015, and the 0.5% Treasury Gilt 2022, and show that we can obtai…
This paper improves bond market making by adjusting hit-ratios for client flow quality.
Optimal liquidation model reduces trading costs in OTC markets.
This paper studies the application of machine learning in extracting the market implied features from historical risk neutral corporate bond yields. We consider the example of a hypothetical illiquid fixed income market. After choosing a surrogate liquid market, we apply the Denoising Autoencoder algorithm from the fie…
The model is aimed to discriminate the 'good' and the 'bad' companies in Russian corporate sector based on their financial statements data based on Russian Accounting Standards. The data sample consists of 126 Russian public companies- issuers of Ruble bonds which represent about 36% of total number of corporate bonds …
This paper studies an application of machine learning in extracting features from the historical market implied corporate bond yields. We consider an example of a hypothetical illiquid fixed income market. After choosing a surrogate liquid market, we apply the Denoising Autoencoder (DAE) algorithm to learn the features…
Study properties of Black-Scholes equation solutions for puttable bonds with credit risk.
Open AI models affect bond yields differently than closed ones.
In corporate bond markets, which are mainly OTC markets, market makers play a central role by providing bid and ask prices for a large number of bonds to asset managers from all around the globe. Determining the optimal bid and ask quotes that a market maker should set for a given universe of bonds is a complex task. U…
Pricing formulae for defaultable corporate bonds with discrete coupons under consideration of the government taxes in the united model of structural and reduced form models are provided. The aim of this paper is to generalize the comprehensive structural model for defaultable fixed income bonds (considered in [1]) into…
In this paper, we implement a stochastic deflator with five economic and financial risk factors: interest rates, market price of risk, stock prices, default intensities, and convenience yields. We examine the deflator with different financial assets, such as stocks, zero-coupon bonds, vanilla options, and corporate cou…
The study improves stock market valuation using volatility and earnings data.
We introduce a new model for pricing corporate bonds, which is a modification of the classical model of Merton. In this new model, we drop the liquidity assumption of the firm's asset value process, and assume that there is a liquidly traded asset in the market whose value is correlated with the firm's asset value, and…
Shorting IG ETFs can hedge bond portfolios during market drawdowns effectively.
In this paper we formulate a corporate bond (CB) pricing model for deriving the term structure of default probabilities (TSDP) and the recovery rate (RR) for each pair of industry factor and credit rating grade, and these derived TSDP and RR are regarded as what investors imply in forming CB prices in the market at eac…
Paper solves bond option pricing with credit risk using Black-Scholes equations.
According to theoretical models of valuing risky corporate securities, risk of default is primary component in overall yield spread. However, sizable empirical literature considers it otherwise by giving more importance to non-default risk factors. Current study empirically attempts to provide relative solution to this…
Deep learning framework for bond and yield curve forecasting with no-arbitrage constraints.
We propose a general framework for the simultaneous modeling of equity, government bonds, corporate bonds and derivatives. Uncertainty is generated by a general affine Markov process. The setting allows for stochastic volatility, jumps, the possibility of default and correlation between different assets. We show how to…