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We use the information in collateralized debt obligations (CDO) prices to study market expectations about how corporate defaults cluster. A three-factor portfolio credit model explains virtually all of the time-series and cross-sectional variation in an extensive data set of CDX index tranche prices. Tranches are priced as if losses of 0.4%, 6%, and 35% of(More)
Almost ten years have passed now since the first concepts for all-solid-state imaging range cameras were proposed in publications or patents [1,3]. The general feasibility was shown relatively quickly [2,4] and it is now widely accepted that CMOS-based range imaging is one of the most promising future technologies in the field of photonics and optical(More)
We consider investment problems where an investor can invest in a savings account, stocks and bonds and tries to maximize her utility from terminal wealth. In contrast to the classical Merton problem we assume a stochastic interest rate. To solve the corresponding control problems it is necessary to prove a veri cation theorem without the usual Lipschitz(More)
We infer a term structure of interbank risk from spreads between rates on interest rate swaps indexed to LIBOR and overnight indexed swaps. We develop a model of interbank risk to decompose the term structure into default and non-default (liquidity) components. We find that, on average, from August 2007 to January 2011, the fraction of total interbank risk(More)
Personal financial decision making plays an important role in modern finance. Decision problems about consumption and insurance are modelled in a continuous-time multi-state Markovian framework. The optimal solution is derived and studied. The model, the problem, and its solution are exemplified by two special cases: In one model the individual takes(More)
a Holger Kraft gratefully acknowledges financial support by Deutsche Forschungsgemeinschaft (DFG). Abstract: We provide explicit solutions to life-cycle utility maximization problems simultaneously involving dynamic decisions on investments in stocks and bonds, consumption of perishable goods, and the rental and the ownership of residential real estate.(More)
In the light of Basel II, redesigning rating systems has been becoming an important issue for banks and other financial institutions. The available data base for this task typically contains only the accepted credit applicants and is thus censored. To evaluate existing and alternative rating systems, we would actually need the full data base of all past(More)