The Annals of Applied Probability

Pricing and trading credit default swaps in a hazard process model

Tomasz R. Bielecki, Monique Jeanblanc, and Marek Rutkowski

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Abstract

In the paper we study dynamics of the arbitrage prices of credit default swaps within a hazard process model of credit risk. We derive these dynamics without postulating that the immersion property is satisfied between some relevant filtrations. These results are then applied so to study the problem of replication of general defaultable claims, including some basket claims, by means of dynamic trading of credit default swaps.

Article information

Source
Ann. Appl. Probab., Volume 18, Number 6 (2008), 2495-2529.

Dates
First available in Project Euclid: 26 November 2008

Permanent link to this document
https://projecteuclid.org/euclid.aoap/1227708926

Digital Object Identifier
doi:10.1214/00-AAP520

Mathematical Reviews number (MathSciNet)
MR2474544

Zentralblatt MATH identifier
1158.91011

Subjects
Primary: 60G35: Signal detection and filtering [See also 62M20, 93E10, 93E11, 94Axx] 60G44: Martingales with continuous parameter 60H30: Applications of stochastic analysis (to PDE, etc.)

Keywords
Credit default swaps defaultable claims first-to-default claims hedging immersion of filtrations Hypothesis H

Citation

Bielecki, Tomasz R.; Jeanblanc, Monique; Rutkowski, Marek. Pricing and trading credit default swaps in a hazard process model. Ann. Appl. Probab. 18 (2008), no. 6, 2495--2529. doi:10.1214/00-AAP520. https://projecteuclid.org/euclid.aoap/1227708926


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