Credit derivatives pricing with default density term structure modelled by L\'evy random fields
AbstractWe model the term structure of the forward default intensity and the default density by using L\'evy random fields, which allow us to consider the credit derivatives with an after-default recovery payment. As applications, we study the pricing of a defaultable bond and represent the pricing kernel as the unique solution of a parabolic integro-differential equation. Finally, we illustrate by numerical examples the impact of the contagious jump risks on the defaultable bond price in our model.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1112.2952.
Date of creation: Dec 2011
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Web page: http://arxiv.org/
Other versions of this item:
- Lijun Bo & Ying Jiao & Xuewei Yang, 2011. "Credit derivatives pricing with default density term structure modelled by Lévy random fields," Working Papers hal-00651397, HAL.
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