Intensity-Based Valuation of Basket Credit Derivatives

Tomasz R. Bielecki and Marek Rutkowski
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Tomasz R. Bielecki: Department of Mathematics, The Northeastern Illinois University, 5500 North St. Louis Avenue, Chicago, IL 60625-4699, USA
Marek Rutkowski: Faculty of Mathematics and Information Science, Politechnika Warszawska, pl. Politechniki 1, 00-661 Warszawa, Poland

Chapter 2 in Recent Developments in Mathematical Finance, 2001, pp 12-27 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractModeling of credit events and related credit derivatives in terms of hazard processes of associated random times has gained much attention in the literature in the recent years. Such an approach to the subject was termed the intensity-based approach. Basket credit derivatives are financial derivatives products deriving their value from changes in credit quality of several underlying credit entities (credit names). We present here some recent results aiming at intensity-based valuation of basket credit derivatives within the context of so-called conditionally independent defaults.

Keywords: Proceedings; Conference; Mathematical Finance; Shanghai (China) (search for similar items in EconPapers)
Date: 2001
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