We study the effect of introducing stochastic volatility in the first passage structural approach to default risk. We analyze the impact of volatility time scales on the yield spread curve. In particular we show that the presence of a short time scale in the volatility raises the yield spreads at short maturities. We argue that combining first passage default modeling with multiscale stochastic...

Based on the fundamental equations of equity valuation, we derive here the relationship between the equity risk premium, duration and dividend yield. Aside from providing a logical foundation for the difference between the ex-ante and ex-post measures of the risk premium, the work leads to other outcomes, namely, but not specifically, (1) that the current, effective dividend policy is a signall...

We explore the determinants of yield differentials between long-term sovereign bonds in the Euro area. There is a common trend in yield differentials, which is correlated with a measure of the international risk factor. In contrast, liquidity differentials display sizeable heterogeneity and no common factor. We present a model that predicts that yield differentials should increase in both liqui...

Insufficient and high variability in rice yield is a threat to food security in China, prompting the need for strategies to mitigate yield variability and increase productivity. This study investigates the presence of production risk and technical inefficiency for a sample of rice farms in the Xiangyang city of China using a stochastic production frontier framework. Results from the risk functi...

As recent events have shown, simultaneous crop losses in different parts of the world can cause serious risks to global food security. However, to date, little is known about the spatial dependency of lower than expected crop yields from global breadbaskets. This especially applies in the case of extreme events, i.e., where one or more breadbaskets are experiencing far below average yields. Wit...

A pulp yield increase up to 2% can be achieved by impregnation with a liquor containing 2 M effective alkali (EA) concentration instead of 1 M. The yield increase is due to higher cellulose and glucomannan contents in the pulp, which can be rationalized by less yield loss by peeling, as impregnation is more effective at an elevated EA level. A rapid loading of chips with alkali can be realized...

We develop a structural bond valuation model to simultaneously capture liquidity and credit risk. Our model implies that renegotiation in financial distress is influenced by the illiquidity of the market for distressed debt. As default becomes more likely, the components of bond yield spreads attributable to illiquidity increase. When we consider finite maturity debt, we find decreasing and con...

We present an arbitrage-free, non-parametric yield curve prediction model which takes the full discretized yield curve data as input state variable. The absence of arbitrage is a particular important model feature for prediction models in case of highly correlated data as, e.g., for interest rates. Furthermore, the model structure allows to separate constructing the daily yield curve from estim...

Risk theory tells us if an insurer can effectively pool a large number of individuals to reduce the total risk, he then can provide the insurance by charging a premium close to the actuarially fair rate. There is, however, a common belief that the risk can be effectively pooled only when the random loss is independent, so that crop insurance markets cannot survive without government subsidy bec...