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dc.contributor.authorPackham, Natalieen
dc.contributor.authorSchlögl, Lutzen
dc.contributor.authorSchmidt, Wolfgang M.en
dc.date.accessioned2010-09-09-
dc.date.accessioned2010-09-24T09:04:18Z-
dc.date.available2010-09-24T09:04:18Z-
dc.date.issued2009-
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
dc.language.isoengen
dc.publisher|aFrankfurt School of Finance & Management, Centre for Practical Quantitative Finance (CPQF) |cFrankfurt a. M.en
dc.relation.ispartofseries|aCPQF Working Paper Series |x21en
dc.subject.jelG12en
dc.subject.jelG13en
dc.subject.jelG24en
dc.subject.jelC69en
dc.subject.ddc330en
dc.subject.keywordgap risken
dc.subject.keywordcredit spreadsen
dc.subject.keywordcredit dynamicsen
dc.subject.keywordfirst passage time modelsen
dc.subject.keywordLévy processesen
dc.subject.keywordgeneral Ornstein-Uhlenbeck processesen
dc.subject.stwFinanzderivaten
dc.subject.stwZinsen
dc.subject.stwRisikoprämieen
dc.subject.stwVolatilitäten
dc.subject.stwStochastischer Prozessen
dc.subject.stwTheorieen
dc.titleCredit dynamics in a first passage time model with jumps-
dc.typeWorking Paperen
dc.identifier.ppn662556127en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen
dc.identifier.repecRePEc:zbw:cpqfwp:21en

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