Modelling Credit Spreads evolution using the Cox Process within the HJM framework
AbstractIn this paper a simulation approach for defaultable yield curve is developed within the Heath et al. (1992) framework. The default event is modelled using the Cox process when the stochastic intensity repre sents the credit spread. The forward credit spread volatility function is affected by the entire credit spread term structure. Cox process properties and the Monte Carlo simulations technique are used for pricing defaultable bonds.
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Bibliographic InfoPaper provided by Dipartimento di Scienze Economiche, Matematiche e Statistiche, Universita' di Foggia in its series Quaderni DSEMS with number 27-2007.
Length: 17 pages
Date of creation: Dec 2007
Date of revision:
HJM model; Cox process; Bond price; Monte Carlo method;
Find related papers by JEL classification:
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-03-08 (All new papers)
- NEP-CFN-2008-03-08 (Corporate Finance)
- NEP-ORE-2008-03-08 (Operations Research)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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