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Information Asymmetry In Pricing Of Credit Derivatives

Author

Listed:
  • CAROLINE HILLAIRET

    (CMAP, Ecole Polytechnique, 91128 Palaiseau, France)

  • YING JIAO

    (LPMA, Université Paris Diderot, 75251 Paris, France)

Abstract

We study the pricing of credit derivatives with asymmetric information. The managers have complete information on the value process of the firm and on the default threshold, while the investors on the market have only partial observations, especially about the default threshold. Different information structures are distinguished using the framework of enlargement of filtrations. We specify risk neutral probabilities and we evaluate default sensitive contingent claims in these cases.

Suggested Citation

  • Caroline Hillairet & Ying Jiao, 2011. "Information Asymmetry In Pricing Of Credit Derivatives," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 14(05), pages 611-633.
    • Handle: RePEc:wsi:ijtafx:v:14:y:2011:i:05:n:s0219024911006413
    DOI: 10.1142/S0219024911006413
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    References listed on IDEAS

    as
    1. Umut Çetin & Robert Jarrow & Philip Protter & Yildiray Yildirim, 2008. "Modeling Credit Risk With Partial Information," World Scientific Book Chapters, in: Financial Derivatives Pricing Selected Works of Robert Jarrow, chapter 23, pages 579-590, World Scientific Publishing Co. Pte. Ltd..
    2. repec:dau:papers:123456789/2191 is not listed on IDEAS
    3. Délia Coculescu, 2006. "Valuation of default sensitive claims under imperfect information," Post-Print halshs-00163334, HAL.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Caroline Hillairet & Ying Jiao, 2015. "Portfolio optimization with insider’s initial information and counterparty risk," Finance and Stochastics, Springer, vol. 19(1), pages 109-134, January.
    2. Monique Jeanblanc & Libo Li & Shiqi Song, 2018. "An enlargement of filtration formula with applications to multiple non-ordered default times," Finance and Stochastics, Springer, vol. 22(1), pages 205-240, January.
    3. Salmerón Garrido, José Antonio & Nunno, Giulia Di & D'Auria, Bernardo, 2022. "Before and after default: information and optimal portfolio via anticipating calculus," DES - Working Papers. Statistics and Econometrics. WS 35411, Universidad Carlos III de Madrid. Departamento de Estadística.
    4. Jos'e A. Salmer'on & Giulia Di Nunno & Bernardo D'Auria, 2022. "Before and after default: information and optimal portfolio via anticipating calculus," Papers 2208.07163, arXiv.org, revised May 2023.

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