PDE APPROACH TO THE VALUATION AND HEDGING OF BASKET CREDIT DERIVATIVES

Marek Rutkowski () and Khan Yousiph
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Marek Rutkowski: School of Mathematics and Statistics, University of New South Wales, Sydney, NSW 2052, Australia
Khan Yousiph: School of Mathematics and Statistics, University of New South Wales, Sydney, NSW 2052, Australia

International Journal of Theoretical and Applied Finance (IJTAF), 2007, vol. 10, issue 08, 1261-1285

Abstract: The goal of this work is to examine the PDE approach to the valuation and hedging of defaultable claims in a Markovian model of credit risk. Our approach is based on the previous work by Bielecki et al. [3]. We extend the results in [3] by considering a general credit risk model, in which the number of traded assets, the dimension of the driving Brownian motion, as well as the number of default times are arbitrary.

Keywords: Credit risk; PDE approach; basket credit derivatives (search for similar items in EconPapers)
Date: 2007
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DOI: 10.1142/S0219024907004640

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