BIROn - Birkbeck Institutional Research Online

Valuation of default-sensitive claims under imperfect information

Coculescu, D. and Geman, Hélyette and Jeanblanc, M. (2008) Valuation of default-sensitive claims under imperfect information. Finance and Stochastics 12 (2), pp. 195-218. ISSN 0949-2984.

Full text not available from this repository.
Official URL: http://dx.doi.org/10.1007/s00780-007-0060-6

Abstract

We propose a valuation method for financial assets subject to default risk, where investors cannot observe the state variable triggering the default but observe a correlated price process. The model is sufficiently general to encompass a large class of structural models and can be seen as a generalization of the model of Duffie and Lando (Econometrica 69:633–664, [2001]). In this setting we prove that the default time is totally inaccessible in the market’s filtration and derive the conditional default probabilities and the intensity process. Finally, we provide pricing formulas for default-sensitive claims and illustrate in particular examples the shapes of the credit spreads.

Item Type: Article
Keyword(s) / Subject(s): Imperfect information, default time, hazard process
School or Research Centre: Birkbeck Schools and Research Centres > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
Depositing User: Administrator
Date Deposited: 28 Jan 2011 15:45
Last Modified: 17 Apr 2013 12:18
URI: http://eprints.bbk.ac.uk/id/eprint/1949

Archive Staff Only (login required)

Edit/View Item Edit/View Item