A Credit-Risk Valuation under the Variance-Gamma Asset Return

Roman V. Ivanov
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Roman V. Ivanov: Laboratory of Control under Incomplete Information, Trapeznikov Institute of Control Sciences of RAS, Profsoyuznaya 65, 117997 Moscow, Russia

Risks, 2018, vol. 6, issue 2, 1-25

Abstract: This paper considers risks of the investment portfolio, which consist of distributed mortgages and sold European call options. It is assumed that the stream of the credit payments could fall by a jump. The time of the jump is modeled by the exponential distribution. We suggest that the returns on stock are variance-gamma distributed. The value at risk, the expected shortfall and the entropic risk measure for this portfolio are calculated in closed forms. The obtained formulas exploit the values of generalized hypergeometric functions.

Keywords: variance-gamma distribution; credit risk; call option; exponential distribution; shortfall risk; generalized hyperbolic function (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:6:y:2018:i:2:p:58-:d:147258

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