English (United Kingdom)

https://curated-unify.zendy.io/wp-json/zendy-region/v1/featured_content/oa?rat=en

https://curated-unify.zendy.io/wp-json/zendy-region/v1/highlighted_journal/

Zendy Plus

Presents the access of premium content as premium feature

Premium Content

Presents the keyphrase highlighting as premium feature

Keyphrase Highlighting

Presents the summarisation as premium feature

Summarisation

Insights

Presents the pdf analysis as premium feature

PDF Analysis

Presents the zaia usage as premium feature

ZAIA

Zendy Tools

Zendy Open

In this paper, we introduce a model that adds a non-linearity to discounting:the discounting factor may depend on the notional (i.e., discounted values areno longer linear in the notional). In the first part of the paper, we provide adiscounting when discount factors cannot be derived from market products. Thatis, a risk-neutralising trading strategy cannot be performed. This is the casewhen one needs a risk-free (default-free) discounting, but default protectionon funding providers is not traded. For this case, we derive a defaultcompensation factor that describes the present value of a strategy tocompensate for default (like buying default protection would do). In a secondpart of the paper, we introduce a model where the survival probability, andhence the discount factor, depends on the notional. This model introduces aneffect not present in the classical modelling of a time-dependent survivalprobability. Our model allows that large liquidity requirements are more likelyto default instantly than small ones. Combined, the two models build aframework where discounting (and hence valuation) is non-linear: discountfactors depend on the amount to be discounted.  Our approach builds on top of the classical theory of discounting (which mayeither be given as market-implied or be derived from a model of utility,consumption and production). In that sense, it is rather a generalisation thanan alternative. The modelling approach has specific relevance for climatemodels, where discounting is an important aspect in assessing the severity offuture events. Our model may result in non-decaying discount factors (negativediscount rates) for certain scenarios.

Non-Linear Discounting and Default Compensation: Valuation of Non-Replicable Value and Damage: When the Social Discount Rate may become Negative