A Markov regime switching jump-diffusion model for the pricing of portfolio credit derivatives
The class of reduced form models is a very important class of credit risk models, and the modeling of the default dependence structure is essential in the reduced form models. This paper proposes a thinning-dependent structure model in the reduced form framework. The intensity process is the jump-diffusion version of the Vasicek model with the coefficients allowed to switch in different regimes. This article will investigate the joint (conditional) survival probability and the pricing formulas of portfolio credit derivatives. The exact analytical expressions are provided.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 83 (2013)
Issue (Month): 1 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/622892/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
References listed on IDEAS
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.:
- Robert J. Elliott & Leunglung Chan & Tak Kuen Siu, 2005. "Option pricing and Esscher transform under regime switching," Annals of Finance, Springer, vol. 1(4), pages 423-432, October.
- Fan Yu, 2007. "Correlated Defaults In Intensity-Based Models," Mathematical Finance, Wiley Blackwell, vol. 17(2), pages 155-173.
- Liang, Xue & Wang, Guojing, 2012. "On a reduced form credit risk model with common shock and regime switching," Insurance: Mathematics and Economics, Elsevier, vol. 51(3), pages 567-575.
- Wang, Guojing & Yuen, Kam C., 2005. "On a correlated aggregate claims model with thinning-dependence structure," Insurance: Mathematics and Economics, Elsevier, vol. 36(3), pages 456-468, June.
- Jin Liang & Jun Ma & Tao Wang & Qin Ji, 2011. "Valuation of Portfolio Credit Derivatives with Default Intensities Using the Vasicek Model," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 18(1), pages 33-54, March.
- J. Benson Durham, 2005. "Jump-diffusion processes and affine term structure models: additional closed-form approximate solutions, distributional assumptions for jumps, and parameter estimates," Finance and Economics Discussion Series 2005-53, Board of Governors of the Federal Reserve System (U.S.).
- George Chacko, 2002. "Pricing Interest Rate Derivatives: A General Approach," Review of Financial Studies, Society for Financial Studies, vol. 15(1), pages 195-241, March.
When requesting a correction, please mention this item's handle: RePEc:eee:stapro:v:83:y:2013:i:1:p:373-381. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.