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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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

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

First available in Project Euclid: 26 November 2008

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Zentralblatt MATH identifier

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.)

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


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.

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