Pricing and Trading Credit Default Swaps in a Hazard Process Model

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...

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Veröffentlicht in:	The Annals of applied probability 2008-12, Vol.18 (6), p.2495-2529
Hauptverfasser:	Bielecki, Tomasz R., Jeanblanc, Monique, Rutkowski, Marek
Format:	Artikel
Sprache:	eng
Schlagworte:	60G35 60G44 60H30 Brownian motion Continuous production Credit default swaps Credit risk defaultable claims Dividends first-to-default claims hedging Hypothesis H immersion of filtrations Logical givens Martingales Savings accounts Self financing portfolio Working papers
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Beschreibung
Zusammenfassung:	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.
ISSN:	1050-5164 2168-8737
DOI:	10.1214/00-AAP520