PDE approach to valuation and hedging of credit derivatives

Tomasz Bielecki, Monique Jeanblanc and Marek Rutkowski

Quantitative Finance, 2005, vol. 5, issue 3, 257-270

Abstract: This paper presents a PDE approach in a Markovian setting to hedge defaultable derivatives. The arbitrage price and the hedging strategy for an attainable contingent claim are described in terms of solutions of a pair of coupled PDEs. For some standard examples of defaultable claims, we provide explicit formulae for prices and hedging strategies.

Keywords: Credit derivatives; Hedging; Valuation; PDE approach (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (14)

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DOI: 10.1080/14697680500149297

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