Default Times in a Continuous Time Markov Chain Economy

Elliott and Hoek van der

Applied Mathematical Finance, 2013, vol. 20, issue 5, 450-460

Abstract: A continuous time financial market is considered where randomness is modelled by a finite state Markov chain. Using the chain, a stochastic discount factor is defined. The probability distributions of default times are shown to be given by solutions of a system of coupled partial differential equations.

Date: 2013
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DOI: 10.1080/1350486X.2012.755825

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