Some short elements on hedging credit derivatives

Dynamic Hedging of Portfolio Credit Derivatives

We compare the performance of various hedging strategies for index collateralized debt obligation (CDO) tranches across a variety of models and hedging methods during the recent credit crisis. Our empirical analysis shows evidence for market incompleteness: a large proportion of risk in the CDO tranches appears to be unhedgeable. We also show that, unlike what is commonly assumed, dynamic model...

Valuation and Hedging of Credit Derivatives

Hedging of Basket Credit Derivatives in Credit Default Swap Market

Credit risk in the pricing and hedging of derivatives

Credit risk is present under various forms in any derivative products. However, the fact is that credit risk is not, in general, priced in the various models commonly used for equity, FX, IR of commodity derivatives. This note is aimed at presenting a few guidelines for the modelling of default risk and spread risk in the context of derivatives, thereby treating any derivative as a genuine cred...

Pde Approach to Valuation and Hedging of Credit Derivatives

Our aim is to examine the PDE approach to the valuation and hedging of a defaultable claim in various settings; this allows us to emphasize the importance of the choice of the traded assets. We start with a general model for the dynamics of the traded primary assets. Subsequently, we specify particular models and we deal with particular defaultable claims such as, for instance, survival claims....