Hayette, Gatfaoui - EconWPA - 2004
We extend the credit risk valuation framework introduced by Gatfaoui (2003) to stochastic volatility models. We state a …-known volatility smile along with two documented determinants, namely stochastic volatility and market risk. Under some regularity … conditions, we specify diffusion functionals leading to an asymptotically (relative to time) mean reverting volatility process …