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Credit default swaps in two-dimensional models with various information flows

Gapeev, Pavel V. and Jeanblanc, Monique (2020) Credit default swaps in two-dimensional models with various information flows. International Journal of Theoretical and Applied Finance. ISSN 0219-0249 (In Press)

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Abstract

We study a credit risk model of a financial market in which the dynamics of intensity rates of two default times are described by linear combinations of three independent geometric Brownian motions. The dynamics of two default-free risky asset prices are modeled by two geometric Brownian motions which are dependent of the ones describing the default intensity rates. We obtain closed form expressions for the no-arbitrage prices of both risk-free and risky credit default swaps given the reference filtration initially and progressively enlarged by the two default times. The accessible default-free reference filtration is generated by the standard Brownian motions driving the model.

Item Type: Article
Official URL: https://www.worldscientific.com/worldscinet/ijtaf
Additional Information: © 2020 World Scientific Publishing Company
Divisions: Mathematics
Subjects: H Social Sciences > HG Finance
Date Deposited: 10 Jan 2020 10:03
Last Modified: 28 Jan 2020 00:16
URI: http://eprints.lse.ac.uk/id/eprint/103031

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