Credit risk and incomplete information: A filtering framework for pricing and risk management

Fontana, Claudio

doi:10.1007/978-88-470-2342-0_23

Cited by 2 publications

(2 citation statements)

References 14 publications

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“…The process Y can include macro-economic covariates describing the state of the economy as well as firmspecific and latent variables, as considered e.g. in [19,20]. Let us define the process L = (L t ) 0≤t≤T by L t := logS t and the…”

Section: The Modeling Frameworkmentioning

confidence: 99%

A unified approach to pricing and risk management of equity and credit risk

Fontana¹,

Montes²

2014

Journal of Computational and Applied Mathematics

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We propose a unified framework for equity and credit risk modeling, where the default time is a doubly stochastic random time with intensity driven by an underlying affine factor process. This approach allows for flexible interactions between the defaultable stock price, its stochastic volatility and the default intensity, while maintaining full analytical tractability. We characterise all riskneutral measures which preserve the affine structure of the model and show that risk management as well as pricing problems can be dealt with efficiently by shifting to suitable survival measures. As an example, we consider a jump-to-default extension of the Heston stochastic volatility model.

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Section: The Modeling Frameworkmentioning

confidence: 99%

A unified approach to pricing and risk management of equity and credit risk

Fontana¹,

Montes²

2014

Journal of Computational and Applied Mathematics

Self Cite

View full text Add to dashboard Cite

show abstract

“…The process Y can include macro-economic covariates describing the state of the economy as well as firm-specific and latent variables, as considered e.g. in [33,34]. Let us define the process L = (L t ) 0≤t≤T by L t := log S t and the R d -valued F-adapted process X = (X t ) 0≤t≤T by X t := (v t , Y t , L t ) , with denoting transposition.…”

Section: The Modeling Frameworkmentioning

confidence: 99%

A Unified Approach to Pricing and Risk Management of Equity and Credit Risk

Fontana

Montes

2012

SSRN Journal

Self Cite

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We propose a unified framework for equity and credit risk modeling, where the default time is a doubly stochastic random time with intensity driven by an underlying affine factor process. This approach allows for flexible interactions between the defaultable stock price, its stochastic volatility and the default intensity, while maintaining full analytical tractability. We characterise all riskneutral measures which preserve the affine structure of the model and show that risk management as well as pricing problems can be dealt with efficiently by shifting to suitable survival measures.As an example, we consider a jump-to-default extension of the Heston stochastic volatility model.

show abstract

Credit risk and incomplete information: A filtering framework for pricing and risk management

Cited by 2 publications

References 14 publications

A unified approach to pricing and risk management of equity and credit risk

A unified approach to pricing and risk management of equity and credit risk

A Unified Approach to Pricing and Risk Management of Equity and Credit Risk

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