This paper presents a 3D model for pricing defaultable bonds with embedded call options. The pricing model incorporates three essential ingredients in the pricing of defaultable bonds: stochastic interest rate, stochastic default risk, and call provision. Both the stochastic interest rate and the stochastic default risk are modeled as a square-root diffusion process. The default risk process is...

1 SUMMARY For applications in finance, we study the stochastic differential equation dX s = (2βX s +δ s)ds+g(X s)dB s with β a negative real number, g a continuous function vanishing at zero which satisfies a Hölder condition and δ a measurable and adapted stochastic process such that t 0 δ u du < ∞ a.e. for all t ∈ IR + and which may have a random correlation with the process X itself. In this...

In this paper, a novel quadratic assignment-based mathematical model is developed for concurrent design of robust inter and intra-cell layouts in dynamic stochastic environments of manufacturing systems. In the proposed model, in addition to considering time value of money, the product demands are presumed to be dependent normally distributed random variables with known expectation, variance, a...