Four-factor model of Quanto CDS with jumps-at-default and stochastic recovery

We modify the model of Itkin, Shcherbakov and Veygman (ISV), proposed for pricing Quanto CDS risky bonds, in several ways. First, recovery rate could significantly vary right before or at default, therefore, here we treat it as stochastic. Second, assume domestic interest to be deterministic, because, shown by ISV, its volatility does not contribute much spread. Finally, solve corresponding systems 4D PDEs use a flavor RBF method which is combination localized finite-difference methods. Results our numerical experiments demonstrate that influence significant if correlation between log-intensity default non-zero. Also, impact mean-reversion on spread comparable with due jump-at-default FX rate.