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Keywords = default-free bond pricing

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14 pages, 316 KiB  
Article
Predicting the Non-Return of Chonsei Lease Deposits in the Republic of Korea
by Joung Oh Park, Jinhee Choi and Guy Ngayo
J. Risk Financial Manag. 2023, 16(10), 439; https://doi.org/10.3390/jrfm16100439 - 9 Oct 2023
Viewed by 2899
Abstract
Chonsei, a Korean housing lease system, enables landlords to acquire direct housing purchase funds without mortgages and offers tenants a cost-effective rental option. However, public concerns have arisen about potential landlord defaults, causing financial distress for tenants. This study examined the risk of [...] Read more.
Chonsei, a Korean housing lease system, enables landlords to acquire direct housing purchase funds without mortgages and offers tenants a cost-effective rental option. However, public concerns have arisen about potential landlord defaults, causing financial distress for tenants. This study examined the risk of non-return of the Chonsei deposit and developed a default prediction model using Chonsei contract data from the Korea Housing and Urban Guarantee Corporation. Starting with the components from Merton’s bond pricing model, we included variables that reflect contract-specific factors, macroeconomic conditions, and the Korean Chonsei practices. The findings revealed that higher house price volatility, elevated debt-to-house value, and risk-free interest rates positively correlate with non-return risk. Meanwhile, certain factors, such as longer remaining maturity, favorable macroeconomic conditions, and rising market Chonsei price trends, demonstrated negative correlations with non-return risk. Consequently, a logistic regression-based default prediction model, with eight risk factors that predict the deposit non-return, was suggested. By identifying risk factors and predicting the non-return risk of deposits, this study contributes to an informed policy decision in planning and practicing Chonsei contracts in the Korean housing market. Full article
(This article belongs to the Section Financial Markets)
18 pages, 544 KiB  
Article
A Generalised CIR Process with Externally-Exciting and Self-Exciting Jumps and Its Applications in Insurance and Finance
by Angelos Dassios, Jiwook Jang and Hongbiao Zhao
Risks 2019, 7(4), 103; https://doi.org/10.3390/risks7040103 - 14 Oct 2019
Cited by 6 | Viewed by 4207
Abstract
In this paper, we study a generalised CIR process with externally-exciting and self-exciting jumps, and focus on the distributional properties and applications of this process and its aggregated process. The aim of the paper is to introduce a more general process that includes [...] Read more.
In this paper, we study a generalised CIR process with externally-exciting and self-exciting jumps, and focus on the distributional properties and applications of this process and its aggregated process. The aim of the paper is to introduce a more general process that includes many models in the literature with self-exciting and external-exciting jumps. The first and second moments of this jump-diffusion process are used to calculate the insurance premium based on mean-variance principle. The Laplace transform of aggregated process is derived, and this leads to an application for pricing default-free bonds which could capture the impacts of both exogenous and endogenous shocks. Illustrative numerical examples and comparisons with other models are also provided. Full article
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