Credit risk modeling with affine processes q
نویسنده
چکیده
This article combines an orientation to credit risk modeling with an introduction to affine Markov processes, which are particularly useful for financial modeling. We emphasize corporate credit risk and the pricing of credit derivatives. Applications of affine processes that are mentioned include survival analysis, dynamic term-structure models, and option pricing with stochastic volatility and jumps. The default-risk applications include default correlation, particularly in first-to-default settings. The reader is assumed to have some background in financial modeling and stochastic calculus. 2005 Elsevier B.V. All rights reserved. JEL classification: G12; G33; C41
منابع مشابه
Credit Risk Modeling with Affine Processes
1 This is the written version of the Cattedra Galileana lectures, Scuola Normale Supe-riore, in Pisa, 2002, made possible through the wonderful organizational work of Maurizio Pratelli, to whom I am most grateful. I am also grateful for support for the course offered by the Associazione Amici della Scuola Normale Superiore, who were generously represented by Mr. Carlo Gulminelli.
متن کاملCredit Derivatives in an Affine Framework (Working Paper Version)
A general and efficient method for valuing credit derivatives based on multiple entities is developed in an affine framework. This includes interdependence of market and credit risk, joint credit migration and counterparty default risk of multiple firms. As an application we provide closed form expressions for the joint distribution of default times, default correlations, and default swap sprea...
متن کاملCDOs in the light of the Current Crisis
This paper proposes a top-down model for pricing Collateralized Debt Obligation (CDOs). Our proposal is both treatable and realistic, in the sense we are able to obtain closed-form solutions to single tranche CDOs and capturing extreme credit events. We use as key ingredients the so-called (T, x)-bonds, as proposed in Filipović, Overbeck, and Schmidt (2008), but generalize their affine specific...
متن کاملA Short Course on Credit Risk Modeling with Affine Processes
8 Correlated Default 19 I am extremely grateful for the wonderful work done by Maurizio Pratelli in arranging my visit to Pisa and for organizing this course, for the hospitality of the Scuola Normale Superiore, and for the support for the course offered by the Associazione Amici della Scuola Normale Superiore, who were generously represented by Mr. Carlo Gulminelli. These notes are currently i...
متن کاملCredit Risk Modeling and the Term Structure of Credit Spreads
In this paper, by applying the potential approach to characterizing default risk, a class of simple affine and quadratic models is presented to provide a unifying framework of valuing both risk-free and defaultable bonds. It has been shown that the established models can accommodate the existing intensity based credit risk models, while incorporating a security-specific credit information facto...
متن کامل