Packham, Natalie; Schlögl, Lutz; Schmidt, Wolfgang M. - Centre for Practical Quantitative Finance <Frankfurt, Main> - 2009
The payoff of many credit derivatives depends on the level of credit spreads. Inparticular, credit derivatives with a … leverage component are subject to gap risk, a riskassociated with the occurrence of jumps in the underlying credit default … to model a credit quality process as an Itˆo integral withrespect to a Brownian motion with a stochastic volatility …