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CPQF Working Paper Series, Frankfurt School of Finance and Management >
Please use this identifier to cite or link to this item:
http://hdl.handle.net/10419/40179
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Full metadata record
| DC Field | | Value | | Language |
| dc.contributor.author | | Packham, Natalie | | en_US |
| dc.contributor.author | | Schlögl, Lutz | | en_US |
| dc.contributor.author | | Schmidt, Wolfgang M. | | en_US |
| dc.date.accessioned | | 2010-09-09 | | en_US |
| dc.date.accessioned | | 2010-09-24T09:03:56Z | | - |
| dc.date.available | | 2010-09-24T09:03:56Z | | - |
| dc.date.issued | | 2009 | | en_US |
| dc.identifier.uri | | http://hdl.handle.net/10419/40179 | | - |
| dc.description.abstract | | The payoff of many credit derivatives depends on the level of credit spreads. In particular, credit derivatives with a leverage component are subject to gap risk, a risk associated with the occurrence of jumps in the underlying credit default swaps. In the framework of first passage time models, we consider a model that addresses these issues. The principal idea is to model a credit quality process as an Itô integral with respect to a Brownian motion with a stochastic volatility. Using a representation of the credit quality process as a time-changed Brownian motion, one can derive formulas for conditional default probabilities and credit spreads. An example for a volatility process is the square root of a Lévy-driven Ornstein-Uhlenbeck process. The model can be implemented efficiently using a technique called Panjer recursion. Calibration to a wide range of dynamics is supported. We illustrate the effectiveness of the model by valuing a leveraged credit-linked note. | | en_US |
| dc.language.iso | | eng | | en_US |
| dc.publisher | | Frankfurt School of Finance & Management Frankfurt, M. | | en_US |
| dc.relation.ispartofseries | | CPQF Working Paper Series 22 | | en_US |
| dc.subject.jel | | G12 | | en_US |
| dc.subject.jel | | G13 | | en_US |
| dc.subject.jel | | G24 | | en_US |
| dc.subject.jel | | C69 | | en_US |
| dc.subject.ddc | | 330 | | en_US |
| dc.subject.keyword | | gap risk | | en_US |
| dc.subject.keyword | | credit spreads | | en_US |
| dc.subject.keyword | | credit dynamics | | en_US |
| dc.subject.keyword | | first passage time models | | en_US |
| dc.subject.keyword | | stochastic volatility | | en_US |
| dc.subject.keyword | | general Ornstein-Uhlenbeck processes | | en_US |
| dc.subject.stw | | Finanzderivat | | en_US |
| dc.subject.stw | | Zins | | en_US |
| dc.subject.stw | | Risikoprämie | | en_US |
| dc.subject.stw | | Credit Default Swap | | en_US |
| dc.subject.stw | | Volatilität | | en_US |
| dc.subject.stw | | Stochastischer Prozess | | en_US |
| dc.subject.stw | | Theorie | | en_US |
| dc.title | | Credit gap risk in a first passage time model with jumps | | en_US |
| dc.type | | Working Paper | | en_US |
| dc.identifier.ppn | | 614782163 | | en_US |
| dc.rights | | http://www.econstor.eu/dspace/Nutzungsbedingungen | | - |
| dc.identifier.repec | | RePEc:zbw:cpqfwp:22 | | - |
| Appears in Collections: | | CPQF Working Paper Series, Frankfurt School of Finance and Management
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