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.

In this paper we develop structural first passage models (AT1P and SBTV) with time-varying volatility and characterized by high tractability, moving from the original work of Brigo and Tarenghi (2004, 2005) [19] [20] and Brigo and Morini (2006)[15]. The models can be calibrated exactly to credit spreads using efficient closed-form formulas for default probabilities. Default events are caused by...

BACKGROUND Tuberculosis is a serious public health problem worldwide. It is the leading cause of death amongst people living with HIV, and default from tuberculosis (TB) treatment in people living with HIV increases the probability of death. The aim of this study was to estimate the survival probability of people living with HIV who default treatment for TB compared to those who complete the tr...

In this paper we give a financial justification, based on non arbitrage conditions, of the (H) hypothesis in default time modelling. We also show how the (H) hypothesis is affected by an equivalent change of probability measure. The main technique used here is the theory of progressive enlargements of filtrations.

In this paper we ‘update’ the option implied probability of default (option iPoD) approach recently suggested in the literature. First, a numerically more stable objective function for the estimation of the risk neutral density is derived whose integrals can be solved analytically. Second, it is reasoned that the originally proposed approach for the estimation of the PoD has some serious drawba...

This paper uses a unique data set from credit files of six leading German banks to provide some empirical insights into their rating systems used to classify corporate borrowers. On the basis of the New Basle Capital Accord, which allows banks to use their internal rating systems to compute their minimum capital requirements, the relations between potential risk factors, rating decisions and th...