Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129954
Authors: 
Hernández del Valle, Gerardo
Year of Publication: 
2015
Series/Report no.: 
Working Papers, Banco de México 2015-21
Abstract: 
The main aim of this work is to price defaultable bonds. In order to achieve this goal we link first hitting densities of Brownian motion with functionals of controlled diffusions. From a practical point of view examples of diffusions with this property are: Brownian motion with linear drift, the 3D Bessel process, the 3D Bessel bridge, and the Brownian bridge, just to mention a few. In turn, these processes are used in finance and economics since they may fall within the category of controlled processes, and/or mean reverting processes.
Subjects: 
bond valuation
Ito processes
hitting times
JEL: 
C60
G0
G1
Document Type: 
Working Paper
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