CREDIT DERIVATIVES PRICING WITH STOCHASTIC VOLATILITY MODELS
2013 ◽
Vol 16
(04)
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pp. 1350019
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Keyword(s):
This paper proposes a model for pricing credit derivatives in a defaultable HJM framework. The model features hump-shaped, level dependent, and unspanned stochastic volatility, and accommodates a correlation structure between the stochastic volatility, the default-free interest rates, and the credit spreads. The model is finite-dimensional, and leads (a) to exponentially affine default-free and defaultable bond prices, and (b) to an approximation for pricing credit default swaps and swaptions in terms of defaultable bond prices with varying maturities. A numerical study demonstrates that the model captures stylized various features of credit default swaps and swaptions.
2013 ◽
Vol 16
(02)
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pp. 1350007
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Keyword(s):
2014 ◽
Vol 6
(4)
◽
pp. 1-34
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Keyword(s):
2017 ◽
Vol 468
◽
pp. 425-433
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2007 ◽
Vol 10
(03)
◽
pp. 407-435
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Keyword(s):
2019 ◽
Vol 22
(03)
◽
pp. 1950003
Keyword(s):