INFORMATION ASYMMETRY IN PRICING OF CREDIT DERIVATIVES

Caroline Hillairet () and Ying Jiao ()
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Caroline Hillairet: CMAP, Ecole Polytechnique, 91128 Palaiseau, France
Ying Jiao: LPMA, Université Paris Diderot, 75251 Paris, France

International Journal of Theoretical and Applied Finance (IJTAF), 2011, vol. 14, issue 05, 611-633

Abstract: We study the pricing of credit derivatives with asymmetric information. The managers have complete information on the value process of the firm and on the default threshold, while the investors on the market have only partial observations, especially about the default threshold. Different information structures are distinguished using the framework of enlargement of filtrations. We specify risk neutral probabilities and we evaluate default sensitive contingent claims in these cases.

Keywords: Asymmetric information; enlargement of filtrations; default threshold; risk neutral probability measures; pricing of credit derivatives (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (4)

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DOI: 10.1142/S0219024911006413

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