This paper is the first in a series that we devote to studying the problems of valuation and hedging of defaultable game options in general, and convertible corporate bonds in particular. Here, we present mathematical foundations for our overall study. Specifically, we provide several results...

<title>Abstract</title> Foreign exchange options are studied in the Heston stochastic volatility model for the exchange rate combined with the Cox <italic>et al</italic>. dynamics for the domestic and foreign stochastic interest rates. The instantaneous volatility is correlated with the dynamics of the exchange rate return,...

This paper presents a PDE approach in a Markovian setting to hedge defaultable derivatives. The arbitrage price and the hedging strategy for an attainable contingent claim are described in terms of solutions of a pair of coupled PDEs. For some standard examples of defaultable claims, we provide...