Credit risk with semimartingales and risk-neutrality

A no-arbitrage framework to model interest rates with credit risk, based on the LIBOR additive process, and an approach to price corporate bonds in incomplete markets, is presented in this paper. We derive the no-arbitrage conditions under different conditions of recovery, and we obtain new expressions in order to estimate the probabilities of default under risk-neutral measure.

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Year of publication:	2008-11
Authors:	Colino, Jesús P. ; Stute, Winfried
Institutions:	Departamento de Estadistica, Universidad Carlos III de Madrid
Subject:	Credit-risk \| Semimartingales \| Interest-rate modelling

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Extent:	application/pdf
Series:	Statistics and Econometrics Working Papers.
Type of publication:	Book / Working Paper
Language:	English
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005190195