Defaultable Options in a Markovian Intensity Model of Credit Risk

DefaultRisk.com the web's biggest credit risk modeling resource.

Submit Your Paper

Fitch Ratings Jobs

[ Worldwide]

Post Your Résumé
For Recruiters

Featured Book

The Banker's Handbook on Credit Risk: Implementing Basel II
by Morton Glantz, Johnathan Mun, Academic Press, May 1, 2008, Hardcover, 432 pages

Training Discounted for DefaultRisk.com visitors only:

The Mathematics of Credit Derivatives: The Essential Credit Modelling and Pricing Companion
by Philipp J. Schönbucher,
WBS Training, August 2003, DVD / Interactive CD-ROM

Sponsor:
Shop at Amazon.com and support DefaultRisk.com

Defaultable Options in a Markovian Intensity Model of Credit Risk

by Tom Bielecki of Illinois Institute of Technology,
Stéphane Crépey of the Université d'Évry,
Monique Jeanblanc of the Université d'Évry,and
Marek Rutkowski of the University of New South Wales & Warsaw University of Technology

December 23, 2007

Abstract: This paper is a follow-up to "Valuation and Hedging of Defaultable Game Options in a Hazard Process Model" by the same authors. In the present paper we give user friendly assumptions ensuring that the general conditions in the previous paper are satisfied. We also give a systematic procedure to construct suitable intensity models of credit risk, and, in the Markovian case, we provide a variational inequality approach to the pre-default pricing problem.

Keywords: defaultable options, hedging, game options, American options, variational inequality, BSDE.

Books Referenced in this Paper: (what is this?)