Abstract The paper considers the pricing of credit default swaps (CDSs) using a revised version risk model proposed in Cathcart and El-Jahel (2003). Default occurs either first time signaling process breaches threshold barrier or unexpectedly at jump Cox process. intensity depends on risk-free interest rate, which follows Vasicek process, instead Cox-Ingersoll-Ross as original model. This offer...

We study the survival probability of an homogeneous group of economic agents by adopting the reduced-form approach and assuming an affine evolution of the default intensities. We consider both the cases of continuous and discrete-times observations, and propose a modified likelihood function. We discuss the estimation of the parameters of interest and the forecast of default probabilities. 1 Se...

In this paper, by applying the potential approach to characterizing default risk, a class of simple affine and quadratic models is presented to provide a unifying framework of valuing both risk-free and defaultable bonds. It has been shown that the established models can accommodate the existing intensity based credit risk models, while incorporating a security-specific credit information facto...

A framework is provided for pricing derivatives on defaultable bonds and other credit-risky contingent claims. The framework is in the spirit of reducedform models, but extends these models to include the case that default can occur only at specific times, such as coupon payment dates. While the framework does not provide an efficient setting for obtaining results about structural models, it is...

While the Gaussian copula model is commonly used as a static quotation device for CDO tranches, its use for hedging is questionable. In particular, the spread delta computed from the Gaussian copula model assumes constant base correlations, whereas we show that the correlations are dynamic and correlated to the index spread. It might therefore be expected that a dynamic model of credit risk, wh...

This dissertation consists of three essays on credit risk models and their Bayesian estimation. In each essay, defaults or default correlation models are built under one of two main streams in credit risk model study: the structural and the intensity models. The first essay studies the usefulness and methods to combine multiple securities information in a single firm asset process and to estima...

A multi-name credit derivative is a security tied to an underlying portfolio of corporate bonds or other credit-sensitive securities. It enables investors to buy and sell protection against the default losses in the portfolio. The value of a multiname derivative depends on the distribution of portfolio loss at multiple horizons. Intensity-based models of the loss point process that are specifie...