Post by Sapphire Capital on Oct 16, 2008 22:28:14 GMT 4
Defaultable Options in a Markovian Intensity Model of Credit Risk
Tomasz R. Bielecki
Illinois Institute of Technology
Stéphane Crépey
Monique Jeanblanc
Université d'Évry - Departement de Mathematiques
Marek Rutkowski
Politechnika Warszawska
Mathematical Finance, Vol. 18, Issue 4, pp. 493-518, October 2008
Abstract:
This paper is a follow-up to Valuation and Hedging of Defaultable Game Options in a Hazard Process Model by the same authors. In the present paper we give user friendly assumptions ensuring that the general conditions in the previous paper are satisfied. We also give a systematic procedure to construct suitable intensity models of credit risk, and, in the Markovian case, we provide a variational inequality approach to the pre-default pricing problem. We finally illustrate our results on a study of defaultable convertible bonds.
papers.ssrn.com/sol3/papers.cfm?abstract_id=1270340
Tomasz R. Bielecki
Illinois Institute of Technology
Stéphane Crépey
Monique Jeanblanc
Université d'Évry - Departement de Mathematiques
Marek Rutkowski
Politechnika Warszawska
Mathematical Finance, Vol. 18, Issue 4, pp. 493-518, October 2008
Abstract:
This paper is a follow-up to Valuation and Hedging of Defaultable Game Options in a Hazard Process Model by the same authors. In the present paper we give user friendly assumptions ensuring that the general conditions in the previous paper are satisfied. We also give a systematic procedure to construct suitable intensity models of credit risk, and, in the Markovian case, we provide a variational inequality approach to the pre-default pricing problem. We finally illustrate our results on a study of defaultable convertible bonds.
papers.ssrn.com/sol3/papers.cfm?abstract_id=1270340