Pricing bonds and CDS in the model with rating migration induced by a Cox process

@article{JacekJakubowski2008,
abstract = {We investigate the properties of a rating migration process assuming that it is given by subordination of a discrete time Markov chain and a Cox process. The problem of pricing of defaultable bonds with fractional recovery of par value with rating migration and credit default swaps is considered. As an example of applications of our results, we give an explicit solution to the pricing problem in a model with short rate and intensity processes given by the solution of a two-dimensional Ornstein-Uhlenbeck equation with a Lévy noise.},
author = {Jacek Jakubowski, Mariusz Niewęgłowski},
journal = {Banach Center Publications},
keywords = {credit risk; rating migration; defaultable bonds; credit default swap; Cox processes; conditional Markov chains},
language = {eng},
number = {1},
pages = {159-182},
title = {Pricing bonds and CDS in the model with rating migration induced by a Cox process},
url = {http://eudml.org/doc/281832},
volume = {83},
year = {2008},
}

TY - JOUR
AU - Jacek Jakubowski
AU - Mariusz Niewęgłowski
TI - Pricing bonds and CDS in the model with rating migration induced by a Cox process
JO - Banach Center Publications
PY - 2008
VL - 83
IS - 1
SP - 159
EP - 182
AB - We investigate the properties of a rating migration process assuming that it is given by subordination of a discrete time Markov chain and a Cox process. The problem of pricing of defaultable bonds with fractional recovery of par value with rating migration and credit default swaps is considered. As an example of applications of our results, we give an explicit solution to the pricing problem in a model with short rate and intensity processes given by the solution of a two-dimensional Ornstein-Uhlenbeck equation with a Lévy noise.
LA - eng
KW - credit risk; rating migration; defaultable bonds; credit default swap; Cox processes; conditional Markov chains
UR - http://eudml.org/doc/281832
ER -