Capital ages and must eventually be replaced. We propose a theory of financing in which firms borrow to finance investment and deleverage as capital ages to have enough financial slack to finance replacement investments. To achieve these dynamics, firms is ...
We introduce a novel class of credit risk models in which the drift of the survival process of a firm is a linear function of the factors. The prices of defaultable bonds and credit default swaps (CDS) are linear-rational in the factors. The price of a CDS ...
We investigate the cross-sectional variation in the credit default swap (CDS)-bond bases and test explanations for the violation of the arbitrage relation between cash bond and CDS contract, which states that the basis should be zero in normal conditions. ...
This thesis studies the valuation and hedging of financial derivatives, which is fundamental for trading and risk-management operations in financial institutions. The three chapters in this thesis deal with derivatives whose payoffs are linked to interest ...
We study American swaptions in the linear-rational (LR) term structure model introduced in Filipović et al. [J. Finance., 2017, 72, 655–704]. The American swaption pricing problem boils down to an optimal stopping problem that is analytically tractable. It ...
We introduce the class of linear-rational term structure models in which the state price density is modeled such that bond prices become linear-rational functions of the factors. This class is highly tractable with several distinct advantages: (i) ensures ...
This thesis presents new flexible dynamic stochastic models for the evolution of market prices and new methods for the valuation of derivatives. These models and methods build on the recently characterized class of polynomial jump-diffusion processes for w ...
We introduce a novel class of term structure models for variance swaps. The multivariate state process is characterized by a quadratic diffusion function. The variance swap curve is quadratic in the state variable and available in closed form, greatly faci ...
This thesis analyzes the interrelation between market structure and price formation in credit derivatives markets. Traditionally, credit derivatives are traded in relatively opaque over-the-counter markets in which trading is segmented and subject to many ...
This dissertation consists of three chapters. The first chapter examines whether the availability of credit default swaps (CDS) has consequences for creditor governance. CDSs offer creditors the opportunity to hedge credit risk and may impact their willing ...
