Paper proposes an analytical pricing model for puttable bonds with credit risk.
problem Analytical pricing of puttable bonds with credit risk.
method Developed a 2-factor structural PDE model and derived analytical pricing formula under specific conditions.
result Derived analytical pricing formula for puttable bonds with credit risk.
Study finds it hard to establish common factor pricing in corporate bonds.
problem Difficulty in establishing common factor pricing in corporate bonds.
method Portfolio- and bond-level analyses using multifactor models.
result Common factor pricing in corporate bonds is not significantly explanatory.
Paper uses machine learning to uncover nonlinear dynamics in CAT bond pricing.
problem Traditional linear models miss nonlinear relationships in CAT bond pricing.
method Advanced machine learning techniques applied to CAT bond transaction records.
result Machine learning enhances CAT bond pricing accuracy and reveals complex risk interactions.
Formula calculates bond prices between payments.
problem No new bond pricing formula available.
method Closed-form formula derivation.
result Formula accurately calculates bond prices.
A pricing formula for discount bonds, based on the consideration of the market perception of future liquidity risk, is established. An information-based model for liquidity is then introduced, which is used to obtain an expression for the bond price. Analysis of the bond price dynamics shows that the bond volatility is…
Deep learning models price convertible bonds with complex reset and call features.
problem Pricing convertible bonds with path-dependent reset and call provisions.
method Formulated as a PPDE, deep learning approximates conditional expectations.
result Deep learning produces stable and accurate prices across various model specifications.
Paper develops bounds for pricing Catastrophic Mortality Bonds.
problem Challenging task in valuing Catastrophic Mortality Bonds.
method Expresses bond payoff as an Asian put option and uses comonotonic theory.
result Derives model-independent bounds for bond pricing.
This article presents valuation of Treasury Bonds (T-Bonds) on Macedonian Stock Exchange (MSE) and empirical test of duration, modified duration and convexity of the T-bonds at MSE in order to determine sensitivity of bonds prices on interest rate changes. The main goal of this study is to determine how standard valuat…
Unified framework for pricing various debt securities.
problem Pricing of different types of debt securities under general short-rate processes.
method Unifying framework using continuous-time Markov chain approximations and bi-dimensional diffusion processes.
result Closed-form matrix expressions and efficient algorithms for pricing various debt securities.
Project uses machine learning to predict bond prices quickly and accurately.
problem Predicting bond prices is challenging due to market complexity and lack of data.
method Used a dataset of bond trades and attributes to train and evaluate various machine learning algorithms.
result Proposed a hybrid time-series aided machine learning method for future work.
Investors choose between bonds and savings accounts based on utility maximization.
problem Determining the optimal investment strategy in a stochastic interest rate environment.
method Analyzes utility maximization under two investment scenarios using affine term structure models.
result Bond indifference prices are found to be the roots of integral expressions.
Paper analyzes pricing model for bonds with early redemption.
problem Analyzing pricing of bonds with early redemption features.
method Structural approach for mathematical modeling of bond prices.
result Existence and uniqueness of default and early redemption boundaries proved.
In the present paper we show that the Binomial-tree approach for pricing, hedging, and risk assessment of Convertible bonds in the framework of the Tsiveriotis-Fernandes model has serious drawbacks. Key words: Convertible bonds, Binomial tree, Tsiveriotis-Fernandes model, Convertible bond pricing, Convertible bond Gree…
Unified Bayesian framework for CAT bond pricing.
problem Uncertainty in catastrophe occurrences and interest rates in CAT bond markets.
method Bayesian framework based on uncertainty quantification of catastrophes and interest rates.
result Unified asset pricing approach with informative expected risk premia.
Reformulates Vasicek model for Lévy processes, deriving bond prices and long bond returns.
problem Deriving bond prices and interest rates in Lévy-Vasicek models.
method Uses pricing kernel method to generalize Vasicek model to Lévy processes.
result Obtained expressions for Lévy-Vasicek bond prices and long bond returns.
A new formula for pricing illiquid corporate bonds.
problem Pricing bonds with limited liquidity in the market.
method Option approach with reduced-form interest and credit risk modeling.
result A simple closed formula for illiquid corporate coupon bond prices.
Paper solves bond option pricing with credit risk using Black-Scholes equations.
problem Pricing options on bonds with credit risk.
method Solution representations of Black-Scholes equations for specific problems.
result Pricing formulae for puttable and callable bonds with credit risk.
Analyzes transaction costs for corporate bonds using a new analytical methodology.
problem Challenges in assessing the quality of corporate bond executions via Transaction Cost Analysis.
method Analyzes TRACE Enhanced dataset to estimate initiator, bid-ask spread, and mid-price dynamics; applies regularized regression models and transient impact models.
result Identifies price impact asymmetry between customer-buy and consumer-sell orders.
Deep learning speeds CAT bond valuation.
problem Valuation of Catastrophe bonds.
method Deep neural networks trained to price CAT bonds.
result Trained model provides fast and accurate pricing.
We model bond's price curves corresponding to the sovereign uruguayan debt nominated in USD, as an alternative to the official bond prices publication released by the Central Bank of Uruguay (CBU). Four different gaussian models are fitted, based on historical data issued by the CBU, corresponding to some of the more f…
Model shows government incentives boost green bond investment.
problem Increasing green investments through government incentives.
method Optimal incentives indexed on bond prices and covariation, applied to a portfolio of bonds.
result Method outperforms current tax-incentives systems in green investments.
Study proposes framework for cyber bonds to compensate cyber attack losses.
problem Cyber risk treatment in finance industry.
method Developed a framework, used publicly available data to determine loss distribution parameters, numerically simulated bond price and characteristics, considered two coupon calculation approaches.
result Numerical simulations of cyber bond price, yield, and characteristics.
This paper presents a method to estimate mid-prices of European corporate bonds using real-time dealer information.
problem Estimating mid-prices in illiquid markets where direct market prices are not available.
method Bayesian approach using particle filtering and sequential Monte Carlo.
result A new method for real-time mid-price estimation of corporate bonds.
This paper uses RL to optimize bid-ask spreads for illiquid corporate bonds.
problem Optimizing bid-ask spreads for illiquid corporate bonds.
method Data-driven approach using Reinforcement Learning.
result Trained RL agent's behavior shows reasonable optimal bid-ask spreads.
Study parameter sensitivities in bond pricing models with jumps.
problem Analyzing the impact of parameters on bond pricing models with jumps.
method Theoretical analysis and MATLAB simulations of a Brownian motion and compound Poisson process.
result Explicit call price formula and verification of sensitivities.
The paper assesses how equity tail risk impacts US Treasury bond returns.
problem The effects of equity tail risk on the US government bond market.
method Estimating equity tail risk using option-implied stock market volatility and assessing its predictive power in reduced-form regressions and a term structure model.
result Equity tail risk significantly predicts one-month excess returns on Treasuries.
We study the optimal stopping problem of pricing an American Put option on a Zero Coupon Bond (ZCB) in the Musiela's parametrization of the Heath-Jarrow-Morton (HJM) model for forward interest rates. First we show regularity properties of the price function by probabilistic methods. Then we find an infinite dimensional…
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…
This paper uses advanced math to price special insurance bonds.
problem Pricing zero-coupon CAT bonds with complex trigger events.
method Develops two models using enlargement of filtration theory.
result Derives closed-form prices for zero-coupon CAT bonds.
The study models and values CAT bonds across multiple regions.
problem Valuation of CAT bonds with dependencies across different regions.
method Developed models for independent, proportional, and arbitrary two-dimensional distribution cases of catastrophe losses in different areas. Applied normal approximation and Wang's transform for pricing.
result Illustrated differences in scenarios and performance of the approximation on real data.
The paper explains how to construct a credit spread curve from bond prices.
problem The challenge of constructing a credit spread curve from bond prices.
method Fit parametrised survival curves to construct the curve, avoiding the Z-spread issue.
result A concise treatment of the high-dollar price bonds trading at higher yields is explained.
We propose a reduced form set of two coupled continuous time equations linking the price of a representative asset and the price of a bond, the later quantifying the cost of borrowing. The feedbacks between asset prices and bonds are mediated by the dependence of their "fundamental values" on past asset prices and bond…
The paper explores bond pricing in short rate models using numerical and analytical methods.
problem Bond pricing in short rate convergence models of interest rates.
method Numerical and analytical methods for obtaining approximate solutions to partial differential equations.
result Approximations of bond prices in short rate convergence models.
The article uses jump-telegraph models to price zero coupon bonds and adjust convexity.
problem Pricing zero coupon bonds and adjusting for convexity in a short rate model.
method Markov-modulated model with jumps, jump-telegraph process, expectation hypothesis.
result Closed formulas for term structure and forward rates are derived.
In this paper we present a rigorously motivated pricing equation for derivatives, including general cash collateralization schemes, which is consistent with quoted market bond prices. Traditionally, there have been differences in how instruments with similar cash flow structures have been priced if their definition fal…
This paper proposes a Monte Carlo technique for pricing the forward yield to maturity, when the volatility of the zero-coupon bond is known. We make the assumption of deterministic default intensity (Hazard Rate Function). We make no assumption on the volatility of the yield. We actually calculate the initial value of …
Repo dealers' market power affects bond prices by up to 2 percentage points.
problem Market power of repo dealers impacts bond prices and liquidity.
method Proprietary data on repo and reverse-repo trades analyzed.
result Market power of repo dealers accounts for 0.5-1.3 percentage points of bond yield deviation.
New model prices corporate bonds by accounting for non-hedgeable risk.
problem Non-hedgeable risk in corporate bond pricing.
method Introduces a new model that drops liquidity assumption and uses a correlated liquid asset.
result Shows arbitrage-free formula for corporate bond pricing with non-hedgeable risk.
This paper introduces a new method to price long-dated insurance contracts.
problem Pricing of long-dated, insurance-type contracts is complex and inconsistent.
method Loading pricing combines theoretically minimal and formally risk-neutral prices.
result Loading degree is constant for minimally fluctuating contracts and is a key characteristic.
Empirical study on long-term discount rates using historical bond prices.
problem Estimating long-term real interest rates and discount rates from historical bond data.
method Using Fourier transforms to derive the discount function and fitting it to historical data.
result Estimated long-term discount rates of 1.7% for UK and 2.2% for US.
Model prices sovereign contingent convertible bonds during crises.
problem Pricing Sovereign Contingent Convertible bonds (S-CoCo) during crises.
method Model CDS spread regime switching as a hidden Markov process, coupled with a mean-reverting stochastic process. Use Longstaff-Schwartz American option pricing framework for simulation.
result Computed future state contingent S-CoCo prices for risk management.
Study properties of Black-Scholes equation solutions for puttable bonds with credit risk.
problem Properties of solutions to Black-Scholes equation for puttable bonds with credit risk.
method Solution representation, min-max estimation, gradient estimates, strict monotonicity analysis.
result Derivation of analytical pricing formulae for puttable bonds with credit risk.
Corporate bond factor research is flawed due to measurement errors and ex-post filtering.
problem Replication crisis in corporate bond factor research.
method Analysis of 108 signals across nine thematic clusters, correction of transaction prices and return filtering.
result Majority of previously documented factors do not produce statistically significant alphas after correction.
We construct a no-arbitrage model of bond prices where the long bond is used as a numeraire. We develop bond prices and their dynamics without developing any model for the spot rate or forward rates. The model is arbitrage free and all nominal interest rates remain positive in the model. We give examples where our mode…
In this paper we compare two classical one-factor diffusion models which are used to model the term structure of interest rates. One of them is based on the Wiener-Bachelier process while the second one is based on the Ornstein-Uhlenbeck process. We show essential differences between the prices of European call options…
We study convexity and monotonicity properties for prices of bonds and bond options when the short rate is modeled by a diffusion process. We provide conditions under which convexity of the price in the short rate is guaranteed. Under these conditions the price is decreasing in the drift and increasing in the volatilit…
Pricing of European basket call option with n-assets and a bond is discussed in this paper, where all prices of n-assets and the bond are driven by Exponential Ornstein-Uhlenbeck processes. The close-form of European basket option pricing formula is derived. Utilizing with 1-order differential approximate numerical sol…
Asymptotic Laplace transform for geometric Brownian motion applied to bond pricing.
problem Laplace transform of geometric Brownian motion time integral.
method Asymptotic analysis for σ2To0 limit. result Approximation for zero coupon bond prices in Dothan model.