This paper presents structural approach for the valuation of credit risk. Credit risk arises whenever a borrower is expecting to use future cash flows to pay a current debt. It is closely tied to the potential return ...This paper presents structural approach for the valuation of credit risk. Credit risk arises whenever a borrower is expecting to use future cash flows to pay a current debt. It is closely tied to the potential return of investment, the most notable being that the yields on bonds correlate strongly to their perceived credit risk. Structural approach is based on the volatility of the total value of the firm. The credit risk to this measured in a standard way. The random time of default is defined in an intuition way. The default event is linked to the notion of the firm＇s insolvency. This approach is known to generated low credit spreads for corporate bonds close to maturity. It requires a judicious specification of the default barrier in order to get a good fit to the observed spread curves.展开更多
Model uncertainty is a type of inevitable financial risk.Mistakes on the choice of pricing model may cause great financial losses.In this paper we investigate financial markets with mean-volatility uncertainty.Models ...Model uncertainty is a type of inevitable financial risk.Mistakes on the choice of pricing model may cause great financial losses.In this paper we investigate financial markets with mean-volatility uncertainty.Models for stock market and option market with uncertain prior distributions are established by Peng’s G-stochastic calculus.On the hedging market,the upper price of an(exotic)option is derived following the Black–Scholes–Barenblatt equation.It is interesting that the corresponding Barenblatt equation does not depend on mean uncertainty of the underlying stocks.Appropriate definitions of arbitrage for super-and sub-hedging strategies are presented such that the super-and sub-hedging prices are reasonable.In particular,the condition of arbitrage for sub-hedging strategy fills the gap of the theory of arbitrage under model uncertainty.Finally we show that the term K of finite variance arising in the superhedging strategy is interpreted as the max Profit&Loss(P&L)of shorting a delta-hedged option.The ask-bid spread is in fact an accumulation of the superhedging P&L and the sub-hedging P&L.展开更多
文摘This paper presents structural approach for the valuation of credit risk. Credit risk arises whenever a borrower is expecting to use future cash flows to pay a current debt. It is closely tied to the potential return of investment, the most notable being that the yields on bonds correlate strongly to their perceived credit risk. Structural approach is based on the volatility of the total value of the firm. The credit risk to this measured in a standard way. The random time of default is defined in an intuition way. The default event is linked to the notion of the firm＇s insolvency. This approach is known to generated low credit spreads for corporate bonds close to maturity. It requires a judicious specification of the default barrier in order to get a good fit to the observed spread curves.
基金The author was supported by the National Natural Science Foundation of China(No.11401414)the National Natural Science Foundation of Jiangsu Province(Nos.BK20140299 and 14KJB110022).
文摘Model uncertainty is a type of inevitable financial risk.Mistakes on the choice of pricing model may cause great financial losses.In this paper we investigate financial markets with mean-volatility uncertainty.Models for stock market and option market with uncertain prior distributions are established by Peng’s G-stochastic calculus.On the hedging market,the upper price of an(exotic)option is derived following the Black–Scholes–Barenblatt equation.It is interesting that the corresponding Barenblatt equation does not depend on mean uncertainty of the underlying stocks.Appropriate definitions of arbitrage for super-and sub-hedging strategies are presented such that the super-and sub-hedging prices are reasonable.In particular,the condition of arbitrage for sub-hedging strategy fills the gap of the theory of arbitrage under model uncertainty.Finally we show that the term K of finite variance arising in the superhedging strategy is interpreted as the max Profit&Loss(P&L)of shorting a delta-hedged option.The ask-bid spread is in fact an accumulation of the superhedging P&L and the sub-hedging P&L.
