Hedging of Credit Derivatives in Models with Totally Unexpected Default
October 7, 2005
Introduction: This paper presents some methods to hedge defaultable derivatives under the assumption that there exist tradeable assets with dynamics allowing for elimination of default risk of derivative securities. We investigate hedging strategies in alternative frameworks with different degrees of generality, an abstract semimartingale framework and a more specific Markovian set-up, and we use two alternative approaches.
This paper is republished as Ch.2 in...