The Intensity Model for Pricing Credit Securities with Jump Diffusion and Counterparty Risk | Zendy

Ruili Hao | Zendy; Zhongxing Ye | Zendy

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The Intensity Model for Pricing Credit Securities with Jump Diffusion and Counterparty Risk

Author(s) -

Ruili Hao,

Zhongxing Ye

Publication year - 2011

Publication title -

mathematical problems in engineering

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.262

H-Index - 62

eISSN - 1026-7077

pISSN - 1024-123X

DOI - 10.1155/2011/412565

Subject(s) - credit risk , jump diffusion , counterparty , credit valuation adjustment , intensity (physics) , bond , jump , interest rate , diffusion , actuarial science , econometrics , business , economics , monetary economics , finance , physics , thermodynamics , quantum mechanics , credit reference

We present an intensity-based model with counterparty risk. We assume the default intensity of firm depends on the stochastic interest rate driven by the jump-diffusion process and the default states of counterparty firms. Furthermore, we make use of the techniques in Park (2008) to compute the conditional distribution of default times and derive the explicit prices of bond and CDS. These are extensions of the models in Jarrow and Yu (2001)

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