Lévy simple structural models
نویسنده
چکیده
The economic idea behind the model is that the tails of the Gaussian distribution are too thin to model the credit market accurately. Although the Gaussian distribution is widely used in other asset classes, it is rarely suitable for extreme out-of-the-money options. But almost all credit default events are extreme events which are controlled by the tail of the distribution. For this reason we reject Brownian motion and look for alternative stochastic processes which have heavier tails.
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