Pricing and Hedging of Rating-Sensitive Claims Modeled by $\mathbb{F}$ -doubly Stochastic Markov Chains

Jacek Jakubowski () and Mariusz Niewęgłowski ()
Additional contact information
Jacek Jakubowski: University of Warsaw, Institute of Mathematics
Mariusz Niewęgłowski: Warsaw University of Technology, Faculty of Mathematics and Information Science

Chapter Chapter 16 in Advanced Mathematical Methods for Finance, 2011, pp 417-453 from Springer

Abstract: Abstract In this paper, we achieve two goals. First we give a formula describing prices of defaultable rating-sensitive claims of general type. Secondly, we solve the problem of replication of an arbitrary rating-sensitive claim on a market on which we can trade in default free assets and a fixed number of defaultable general rating-sensitive claims. The credit rating migration process is modeled by $\mathbb{F}$ -doubly stochastic Markov chains, a broad class of processes which contains Markov chains and is fully characterized by some martingale property.

Keywords: Credit derivatives; Ex-dividend price; Cumulative price; Cash flow; Rating migration; Hedging; $\mathbb{F}$ -doubly stochastic Markov chain; 91G40; 91G20; 60H30 (search for similar items in EconPapers)
Date: 2011
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-642-18412-3_16

Ordering information: This item can be ordered from
http://www.springer.com/9783642184123

DOI: 10.1007/978-3-642-18412-3_16

Access Statistics for this chapter

More chapters in Springer Books from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().