Pricing contingent claims with credit risk: Asymptotic expansion approach

Yoshifumi Muroi

Finance and Stochastics, 2005, vol. 9, issue 3, 415-427

Abstract: The pricing problems of credit derivatives have received much attention in the last decade. An important unresolved problem, however, is the pricing of credit derivatives under the general environment in which the interest rate process and the hazard rate process are stochastic. This article addresses the pricing problems of credit derivatives by the asymptotic expansion approach. This approach has only recently been introduced to mathematical finance, and it enables us to evaluate credit derivatives under a widely adapted class of models. We also present a numerical study. Copyright Springer-Verlag Berlin/Heidelberg 2005

Keywords: Defaultable bond; asymptotic expansion approach; spot interest rate; hazard rate process; credit defaultable swaps; options on defaultable bonds (search for similar items in EconPapers)
Date: 2005
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DOI: 10.1007/s00780-004-0147-2

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