Modelling Credit Spreads evolution using the Cox Process within the HJM framework
Viviana Fanelli (v.fanelli@unifg.it) and
Silvana Musti (s.musti@unifg.it)
Quaderni DSEMS from Dipartimento di Scienze Economiche, Matematiche e Statistiche, Universita' di Foggia
Abstract:
In this paper a simulation approach for defaultable yield curve is developed within the Heath et al. (1992) framework. The default event is modelled using the Cox process when the stochastic intensity repre sents the credit spread. The forward credit spread volatility function is affected by the entire credit spread term structure. Cox process properties and the Monte Carlo simulations technique are used for pricing defaultable bonds.
Keywords: HJM model; Cox process; Bond price; Monte Carlo method (search for similar items in EconPapers)
JEL-codes: C63 G13 G33 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2007-12
New Economics Papers: this item is included in nep-cfn and nep-ore
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Citations: View citations in EconPapers (2)
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Persistent link: https://EconPapers.repec.org/RePEc:ufg:qdsems:27-2007
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