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This paper introduces a novel stochastic model for credit spreads. The stochastic approach leverages the diffusion of default intensities via a CIR++ model and is formulated within a risk-neutral probability space. Our research primarily addresses two gaps in the literature. The first is the lack of credit spread models founded on a stochastic basis that enables continuous modeling, as many existing models rely on fa…
Neutral Rate Estimate — Estimates of the equilibrium real policy rate that separates restrictive from accommodative stance.
Statistical Arbitrage — Short-horizon RV on co-moving securities using factor neutralization.
Delta Neutral Portfolio — Book constructed so first-order spot sensitivity is near zero.
Factor Neutrality (Systems).
Delta Neutral Portfolio — Book constructed so first-order spot sensitivity is near zero.
Factor Neutrality (Systems).
Neutral Rate Estimate — Estimates of the equilibrium real policy rate that separates restrictive from accommodative stance.
Statistical Arbitrage — Short-horizon RV on co-moving securities using factor neutralization.