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Purpose – To study stochastic volatility in the pricing of options. Design/methodology/approach – Random‐coefficient autoregressive and generalized autoregressive conditional heteroscedastic models are studied. The option‐pricing formula is viewed as a moment of a truncated normal...
Purpose – The aim of this paper is to study the impact of equity returns volatility of reference entities on credit‐default swap rates using a new dataset from the Japanese market. Design/methodology/approach – Using a copula approach, the paper models the different relationships that can...
Purpose – To implement the model described in the companion paper, “Pricing credit risk through equity options calibration, part 1 – theory,” and show how to calculate the price of a set of coupon bonds issued by a US telecommunications and media company, AOL Time Warner, based on the...
Purpose – To propose a new methodology to infer the risk‐neutral default probability curve of a generic firm XYZ from equity options prices. Design/methodology/approach – It is assumed that the market is arbitrage‐free and the “market” probability measure implied in the equity options...
Purpose – The purpose of this paper is to focus on international acquisitions that took place in the insurance sector by US‐based firms in the years 1997‐2003 and their impact on shareholder wealth. Design/methodology/approach – The study sample is based on 52 international acquisitions...
Purpose – Following Hadar and Seo, the paper aims to determine, in the case of a portfolio with three assets, the condition of preservation of comparative statics results under which a change in risk increases the optimal value of the decision variables for all risk‐averse investors....
Purpose – The purpose of this editorial is to study the relationship between the pure risks of insurance and the speculative risks of other financial markets in the context of financial services “convergence”. Design/methodology/approach – The editorial recasts the difference between pure...
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