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Dynamics of multivariate default system in random environment

Nicole El Karoui, Monique Jeanblanc and Ying Jiao

Stochastic Processes and their Applications, 2017, vol. 127, issue 12, 3943-3965

Abstract: We consider a multivariate default system where random environmental information is available. We study the dynamics of the system in a general setting of enlargement of filtrations and adopt the point of view of change of probability measures. We also make a link with the density approach in the credit risk modelling. Finally, we present a martingale characterization result with respect to the observable information filtration on the market.

Keywords: Multiple defaults; Prediction process; Product space and product measure; Change of probability measure; Density hypothesis; Martingale characterization (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:eee:spapps:v:127:y:2017:i:12:p:3943-3965