Pricing contingent claims with credit risk: Asymptotic expansion approach

Research output: Contribution to journalArticle

13 Citations (Scopus)

Abstract

The pricing problems of credit derivatives have received much attention in the last decade. An important unresolved problem, however, is the pricing of credit derivatives under the general environment in which the interest rate process and the hazard rate process are stochastic. This article addresses the pricing problems of credit derivatives by the asymptotic expansion approach. This approach has only recently been introduced to mathematical finance, and it enables us to evaluate credit derivatives under a widely adapted class of models. We also present a numerical study.

Original languageEnglish
Pages (from-to)415-427
Number of pages13
JournalFinance and Stochastics
Volume9
Issue number3
DOIs
Publication statusPublished - 2005 Jul 1
Externally publishedYes

Keywords

  • Asymptotic expansion approach
  • Credit defaultable swaps
  • Defaultable bond
  • Hazard rate process
  • Options on defaultable bonds
  • Spot interest rate

ASJC Scopus subject areas

  • Statistics and Probability
  • Finance
  • Statistics, Probability and Uncertainty

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