Sequential defaults and incomplete information
نویسندگان
چکیده
incomplete information. In this model, investors observe neither a firm’s value nor its default barrier. The model takes into account the short-term risk inherent in default events, the market-wide impact of defaults on security prices due to counterparty relations among firms, and the cyclical default dependence effects observed in credit markets. We explicitly calculate the pricing trend and the arrival intensity of the k th-to-default. These results furnish (1) tractable reducedform formulae for arrival probabilities of sequential dependent defaults and prices of multi-name credit derivatives, and (2) an algorithm for the simulation of sequential unpredictable default times.
منابع مشابه
Successive Correlated Defaults in a Structural Model
We propose a multi-firm first-passage credit model in which investors have incomplete information. In this model, investors cannot observe a firm’s value process and its default barrier process. The model accounts for the short term risk inherent in default events, the market-wide impact of defaults on security prices due to counterparty relations between firms, and the cyclical default correla...
متن کاملTwo-level Default Theories
Default Logic employs assumption-based default rules to draw plausible consequences in face of incomplete information. In ontology representation, there are two kinds of relations between concepts: subsumption relation and default subsumption relation. Subsumption relation is transitive, whereas default subsumption relation is transitive by default. Both default transitivity of default subsumpt...
متن کاملInstantiation Semantics of Temporal Defaults
Defaults are useful in temporal logic, e.g. in order to formalize implicit negation, the “minimal change” frame rule, and inheritance with overriding. Temporal specification formalisms usually have such defaults built-in, but the on-going discussion about the right implicit assumptions suggests that these assumptions are application-dependent and should be explicitly specified by means of defau...
متن کاملIncentives and Information as Driving Forces of Default Effects†
The behavioral relevance of non-binding defaults is well established. While most research has focused on decision makers’ responses to a given default, we argue that this individual decision making perspective is incomplete. Instead, a comprehensive understanding of default effects requires to take account of the strategic interaction between default setters and decision makers. We analyze theo...
متن کاملA simple and numerically stable primal-dual algorithm for computing Nash-equilibria in sequential games with incomplete information
We present a simple primal-dual algorithm for computing approximate Nash equilibria in two-person zero-sum sequential games with incomplete information and perfect recall (like Texas Hold’em poker). Our algorithm only performs basic iterations (i.e matvec multiplications, clipping, etc., and no calls to external first-order oracles, no matrix inversions, etc.) and is applicable to a broad class...
متن کامل