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Defaultable claims in switching models with partial information

Gapeev, Pavel V. and Jeanblanc, Monique (2019) Defaultable claims in switching models with partial information. International Journal of Theoretical and Applied Finance, 22 (4). ISSN 0219-0249

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Identification Number: 10.1142/S0219024919500067

Abstract

We study a credit risk model for a financial market in which the local drift rate of the logarithm of the intensity of the default time changes at the times at which certain unobservable external events occur. The risk-neutral dynamics of the default intensity are described by a generalized geometric Brownian motion and the changes of the local drift rate arrive at independent exponential times. We obtain closed form expressions for the rational values of defaultable European-style contingent claims through the filtering estimates of the occurrence of switching times given the filtration generated by the default intensity process.

Item Type: Article
Additional Information: © 2019 World Scientific Publishing Co Pte Ltd
Divisions: Mathematics
Subjects: Q Science > QA Mathematics
Date Deposited: 13 Feb 2019 00:05
Last Modified: 20 Nov 2019 12:24
URI: http://eprints.lse.ac.uk/id/eprint/100079

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