DefaultRisk.com the web's biggest credit risk modeling resource.

Credit Jobs

Home Glossary Links FAQ / About Site Guide Search
pp_model135

Up

Submit Your Paper

In Rememberance: World Trade Center (WTC)

doi> search: A or B

Export citation to:
- HTML
- Text (plain)
- BibTeX
- RIS
- ReDIF

Reduced Form Modelling for Credit Risk

by Monique Jeanblanc of the UniversitÚ d'╔vry Val d'Essonne & Institut Europlace de Finance, and
Yann Le Cam of the UniversitÚ d'╔vry Val d'Essonne & French Treasury

November 12, 2007

Abstract: The purpose of this paper is to present in a unified context the reduced form modeling approach, in which a credit event is modelled as a totally inaccessible stopping time. Once the general framework is introduced (frequently referred to as "pure intensity" set-up), we focus on the special case where the full information at the disposal of the traders may be split in two sub-filtrations, one of them carrying the full information of the occurrence of the credit event (in general referred to as "hazard process" approach). The general pricing rule when only one filtration is considered reveals to be non tractable in most of cases, whereas the second construction leads to much simplest formulas. Examples are given and evidence advanced that this set-up is more tractable.

Books Referenced in this paper:  (what is this?)

Download paper (296K PDF) 21 pages