On the simulation of portfolios of interest rate and credit risk sensitive securities

European Journal of Operational Research

Volumn 161, Issue 2, 2005, Pages 298-324

  Jobst, Norbert J ^a,b   Zenios, Stavros A ^c  

^a BRUNEL UNIVERSITY   (United Kingdom)

^b UNIVERSITY OF CYPRUS   (Cyprus)

^c UNIVERSITY OF PENNSYLVANIA   (United States)

Author keywords

Credit risk; Default risk; Integrated product management; Simulation

Indexed keywords

COMPUTER SIMULATION; OPERATIONS RESEARCH; OPTIMIZATION; RANDOM PROCESSES; RISK ASSESSMENT;

CREDIT RISK; DEFAULT RISK; INTEGRATED PRODUCT MANAGEMENT; STRUCTURAL MODELS;

FINANCE;

EID: 5444240823     PISSN: 03772217     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.ejor.2003.08.044     Document Type: Article

References (46)

1. Arvanitis A., Gregory J., Laurent J.-P. Building models for credit spreads. Journal of Derivatives. 6(3):1999;27-43.
2. Babbel D.F., Zenios S.A. Pitfalls in the analysis of option-adjusted spreads. Financial Analysts Journal. 48(4):1992;65-69.
3. Bélanger, A., Shreve, S.E., Wong, D., 2001. A unified model for credit derivatives. Technical report.
4. Bielecki T.R., Rutkowski M. Credit Risk: Modelling, Valuation and Hedging. 2002;Springer-Verlag.
5. Black F., Karasinski P. Bonds and option pricing when short rates are lognormal. Financial Analysts Journal. 47(4):1991;52-59.
6. Black F., Scholes M. The pricing of options and corporate liabilities. Journal of Political Economy. 81:1973;637-654.
7. Brémaud P. Point Processes and Queues. 1981;Springer, Berlin.
8. Bucay N., Rosen D. Credit risk of an international bond portfolio: A case study. Algo Research Quarterly. 2(1):1999;9-29.
9. Collin-Dufresne, P., Solnik, B., 2000. On the term structure of default premia in the swap and libor markets. Working paper, Carnegie Mellon University.
10. Davis M.H.A., Lo V. Infectious defaults. Quantitative Finance. 1:2001;382-386.
11. Driessen, J., 2002. Is Default Event Risk Priced in Corporate Bonds? University of Amsterdam.
12. Duffie D., Singleton K.J. Modelling term structures of defaultable bonds. The Review of Financial Studies. 12(4):1999;687-720.
13. Düllmann, K., Windfuhr, M., 1999. Implementing Affine Models for Credit Spreads Between European Sovereign Bonds. University of Mannheim.
14. El Karoui, N., Martellini, L., 2002. A theoretical inspection of the market price for default risk. Ecole Polytechnique/University of Southern California.
15. Elton E.J., Gruber M.J., Agrawal D., Mann C. Explaining the rate spread on corportae bonds. Journal of Finance. 56:2001;247-277.
16. Gordy M.B. A comparative anatomy of credit risk models. Journal of Banking and Finance. 24(1/2):2000;119-149.
17. Huang, J.-z., Huang, M., 2002. How much of the corporate-treasury yield spread is due to credit risk? a new calibration approach. Technical report, Pennsylvania State University and Stanford University.
18. Hull J. Options, Futures and other Derivatives. fourth ed. 1999;Longman Higher Education.
19. Hull J., White A. Pricing interest rate derivative securities. Review of Financial Studies. 3:1990;573-592.
20. Hull J., White A. Numerical procedures for implementing term structure models II: Two-factor models. Journal of Derivatives. 2(2):1994;37-48.
21. Hull, J., White, A., 1996. Using riskmetrics to get a and σ in the hull-white model. Training material.
22. Jarrow R.A., Turnbull S.M. Pricing derivatives and financial securities subject to credit risk. Journal of Finance. 50:1995;53-85.
23. Jarrow R.A., Yu F. Counterparty risk and the pricing of defaultable securities. Journal of Finance. 56:2001;1765-1799.
24. Jarrow R.A., Lando D., Turnbull S.M. A Markov model for the term structure of credit risk spreads. The Review of Financial Studies. 10(2):1997;481-523.
25. Jobst, N.J., 2002. On Credit Risk Modelling, Management and Optimisation. PhD thesis, Department of Mathematical Sciences, Brunel University.
26. Jobst, N.J., Schönbucher, P., 2002. Current developments reduced-form models of default risk. Technical report, Brunel University/University of Bonn.
27. Jobst N.J., Zenios S.A. Tracking bond indices in an integrated market and credit risk environment. Quantitative Finance. 3(2):2001;117-135.
28. Jones E., Mason S., Rosenfeld E. Contingent claim analysis of corporate capital structures: An empirical investigation. Journal of Finance. 6(39):1984;611-625.
29. Kaelhofer, S., 1996. Portfolio Management of Default Risk, Internal Document, KMV Corporation.
30. Kiesel, R., Perraudin, W., Taylor, A., 2001. The structure of credit risk: spread volatility and ratings transitions. Technical report, Bank of England, ISSN 1268-5562.
31. Kijima M. Valuation of a credit swap of basket type. Review of Derivatives Research. 4:2000;81-97.
32. Kijima M., Muromachi Y. Credit events and the valuation of credit derivatives of basket type. Review of Derivatives Research. 5:2000;55-79.
33. Kijima, M., Komoribayashi, K., Suzuki, E., 2000. A multivariate Markov model for simulating correlated defaults. Technical report, Faculty of Economics, Tokyo Metropolitan University.
34. Kim, J., Sundaresan, S., Ramaswamy, K., 1992. The valuation of corporate fixed income securities.
35. Kim J., Ramaswamy K., Sundaresan S. Does default risk in coupons affect the valuation of corporate bonds? a contingent claims model. Financial Management. 1993;117-131.
36. Lando D. On Cox processes and credit risky securities. Review of Derivatives Research. 2(2/3):1998;99-120.
37. Merton R.C. On the pricing of corporate debt: The risk structure of interest rate. Journal of Finance. 2:1974;449-470.
38. Mulvey J.M., Zenios S.A. Capturing the correlations of fixed-income instruments. Management Science. 40:1994;1329-1342.
39. Nickell P., Perraudin W.R., Varotto S. The stability of ratings transitions. Journal of Banking and Finance. 24:2000;203-228.
40. Nelson C.R., Siegel A.F. Parsimonious modeling of yield curves. Journal of Business. 60(4):1987;473-489.
41. Nielsen, S.S., Ronn, E.I., 1997. The valuation of default risk in corporate bonds and interest rate swaps. In: Boyle, P., Pennacchi, G., Ritchken, P. (Eds.), Advances in Futures and Options Research, Vol. 9. JAI Press, pp. 175-196.
42. Schmid B., Zagst R. A three-factor defaultable term structure model. The Journal of Fixed Income. 10(2):2000;63-79.
43. Schönbucher P.J. Term structure modelling of defaultable bonds. Review of Derivatives Research. 2(2/3):1998;161-192.
44. Schönbucher, P.J., 1999. Credit Risk Modelling and Credit Derivatives. PhD thesis, Faculty of Economics, Bonn University.
45. Schönbucher, P., Schubert, D., 2001. Copula-dependent default risk in intensity models. Technical report, Department of Statistics, University of Bonn.
46. Worzel K.J., Vassiadou-Zeniou C., Zenios S.A. Integrated simulation and optimization models for tracking fixed-income indices. Operations Research. 42(2):1994;223-233.