A Note on Lando's Formula and Conditional Independence

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A Note on Lando's Formula and Conditional Independence

by Xin Guo of the University of California at Berkeley,
Robert A. Jarrow of Cornell University, and
Christian Menn of Cornell University

May 29, 2007

Abstract: We extend Lando's formula for pricing credit risky derivatives to models where a firm's characteristics and its default point process need not be conditionally independent. This result is presented under a simple filtration expansion framework with basic probability techniques.

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