This paper mainly discusses the pricing of credit default swap (CDS) in the fractional dimension environment. We assume that the default intensity of a firm depends on the default states of counterparty firms and the term structure of interest rates, but the contagious impact of the counterparty firm is decreasing over time, until disappears. The interest rate risk is reflected by the fractiona...

We employ the formalism of default logic to model certain phenomena of autistic reasoning. Our main finding is that while people with autism may be able to process single default rules, they have a characteristic difficulty in cases where multiple default rules conflict. Even though default reasoning was intended to simulate the reasoning of typical human subjects, it turns out that following t...

We develop a general and efficient method for valuating credit derivatives based on multiple entities in an affine framework. This includes interdependence of market and credit risk, joint credit migration and counterparty default risk of multiple firms. As an application we provide closed form expressions for the joint distribution of default times, default correlations, and credit default spr...

This paper presents a new structural framework for multidimensional default risk. We define the time of default as the first time the log-return of the stock price of a firm jumps below a (possibly nonconstant) default level. When stock prices are exponential Lévy, this framework is equivalent to a reduced form approach, where the intensity process is parametrized by a Lévy measure. The depende...

We develop a dynamic model to assess the effects of liquidity and leverage requirements on banks’ insolvency risk. The model features endogenous capital structure, liquid asset holdings, payout, and default decisions. In the model, banks face taxation, flotation costs of securities, and default costs. They are financed with equity, insured deposits, and risky debt. Using the model, we show that...

Theory predicts that default breach remedies are immaterial whenever contracting costs are negligible. Some experimental studies, however, suggest that in practice default rules do matter, as they may a¤ect parties' preferences over contract terms. This paper presents results from an experiment designed to address the importance of default breach remedies for actual contract outcomes. We …nd th...

Default logic is one of the best known and most studied of the approaches to nonmonotonic reasoning. Subsequently, several variants of default logic have been proposed to give systems with properties differing from the original. In this paper we show that these variants are in a sense superfluous, in that for any of these variants of default logic, we can exactly mimic the behaviour of a varian...

Incorporation of defaults in grammar formalisms is important for reasons of linguistic adequacy and grammar organization. In this paper we present an algorithm for handling default information in unification grammar. The algorithm specifies a logical operation on feature structures, merging with the non-default structure only those parts of the default feature structure which are not constraine...

It is hardly contestable that in interpreting the speaker’s utterance the addressee is frequently driven by the salience of some of the possible interpretations. This salience can be caused by a greater frequency of a certain meaning or by its simplicity, but ultimately it boils down to the knowledge of social and cultural conventions or to some cognitive principles that govern our thinking. De...