In its October 2013's consultative paper for a revised market risk framework (FRTB), and subsequent versions published thereafter, the Basel Committee suggests that non-securitization credit positions in the trading book be subject to a separate Default Risk Charge (DRC, formally Incremental...

This paper constructs a model for the evolution of a risky security that is consistent with a set of observed call option prices. It explicitly treats the fact that only a discrete data set can be observed in practice. The framework is general and allows for state dependent volatility and jumps....

This article shows how a modeling framework for the evolution of credit spreads can be built up starting from a simple representation with only two states - default and no default. The model is generalized by introducing credit classes, with transitions from one class to another driven by a...