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dc.contributor.authorPackham, Natalieen_US
dc.contributor.authorSchlögl, Lutzen_US
dc.contributor.authorSchmidt, Wolfgang M.en_US
dc.date.accessioned2010-09-09en_US
dc.date.accessioned2010-09-24T09:04:18Z-
dc.date.available2010-09-24T09:04:18Z-
dc.date.issued2009en_US
dc.identifier.urihttp://hdl.handle.net/10419/40190-
dc.description.abstractThe payoff of many credit derivatives depends on the level of credit spreads. In particular, the payoff of credit derivatives with a leverage component is sensitive to jumps in the underlying credit spreads. In the framework of first passage time models we extend the model introduced in [Overbeck and Schmidt, 2005] to address these issues. In the extended a model, a credit quality process is driven by an Itô integral with respect to a Brownian motion with stochastic volatility. Using a representation of the credit quality process as a time-changed Brownian motion, we 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. We show that jumps in the volatility translate into jumps in credit spreads. We examine the dynamics of the OS-model and the extended model and provide examples.en_US
dc.language.isoengen_US
dc.publisherFrankfurt School of Finance & Management Frankfurt, M.en_US
dc.relation.ispartofseriesCPQF Working Paper Series 21en_US
dc.subject.jelG12en_US
dc.subject.jelG13en_US
dc.subject.jelG24en_US
dc.subject.jelC69en_US
dc.subject.ddc330en_US
dc.subject.keywordgap risken_US
dc.subject.keywordcredit spreadsen_US
dc.subject.keywordcredit dynamicsen_US
dc.subject.keywordfirst passage time modelsen_US
dc.subject.keywordLévy processesen_US
dc.subject.keywordgeneral Ornstein-Uhlenbeck processesen_US
dc.subject.stwFinanzderivaten_US
dc.subject.stwZinsen_US
dc.subject.stwRisikoprämieen_US
dc.subject.stwVolatilitäten_US
dc.subject.stwStochastischer Prozessen_US
dc.subject.stwTheorieen_US
dc.titleCredit dynamics in a first passage time model with jumpsen_US
dc.typeWorking Paperen_US
dc.identifier.ppn614452759en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
dc.identifier.repecRePEc:zbw:cpqfwp:21-
Appears in Collections:CPQF Working Paper Series, Frankfurt School of Finance and Management

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