A Direct Approach to Arbitrage-Free Pricing of Credit Derivatives
This paper develops a model for the pricing of credit derivatives using observables. The model (i) is arbitrage-free, (ii) accommodates path-dependence, and (iii) handles a range of securities, even with American features. The computer implementation uses a recursive scheme that is convenient and seamlessly processes forward induction and backward recursion, needed to compute more complicated derivative securities.
|Date of creation:||Jul 1998|
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