Markov Chain Models of Portfolio Credit Risk
by Tomasz R. Bielecki of the Illinois Institute of Technology,
November 23, 2009
Abstract: In this paper, we present a selection of methods and results regarding various applications of the theory of continuous time Markov chains to valuation of credit derivatives. We present both theoretical and numerical aspects of the Markovian methodology.
Keywords: continuous time Markov chains, phase-type distributions, calibration.