Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/257902 
Year of Publication: 
2019
Citation: 
[Journal:] Risks [ISSN:] 2227-9091 [Volume:] 7 [Issue:] 2 [Article No.:] 64 [Publisher:] MDPI [Place:] Basel [Year:] 2019 [Pages:] 1-17
Publisher: 
MDPI, Basel
Abstract: 
This paper discusses ambiguity in the context of single-name credit risk. We focus on uncertainty in the default intensity but also discuss uncertainty in the recovery in a fractional recovery of the market value. This approach is a first step towards integrating uncertainty in credit-risky term structure models and can profit from its simplicity. We derive drift conditions in a Heath-Jarrow-Morton forward rate setting in the case of ambiguous default intensity in combination with zero recovery, and in the case of ambiguous fractional recovery of the market value.
Subjects: 
model ambiguity
default time
credit risk
no-arbitrage
reduced-form HJM models
recovery process
Persistent Identifier of the first edition: 
Creative Commons License: 
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Document Type: 
Article
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