A Markov Model for the Term Structure of Credit Risk Spreads

Robert Jarrow (), David Lando and Stuart M. Turnbull
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Stuart M. Turnbull: Queen's University, UK

Chapter 18 in Financial Derivatives Pricing:Selected Works of Robert Jarrow, 2008, pp 411-453 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractThe following sections are included:The Jarrow–Turnbull ModelCredit Ratings and Default-Probabilities: The Discrete Time CaseValuationOptions and hedgingFitting the credit class zero-curvesDiscussionCredit Ratings and Default Probabilities: The Continuous Time CaseValuationOptions and hedgingExamplesParameter estimationEstimation of default-free parametersEstimation of the bankruptcy process parametersEstimating the recovery rateEstimating the generator matrix ΛEstimation of the empirical generator matrix ΛEstimation of the risk premiumSurvival probabilities and spreads under risk neutralityAn illustrative estimation of the risk premiaConclusionAppendix AAppendix BReferences

Keywords: Derivatives; Options; Hedging; HJM; Black–Scholes; Forwards; Futures; Martingale Measure; Calls; Puts; Market Manipulation; Margin Requirements (search for similar items in EconPapers)
Date: 2008
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Related works:
Journal Article: A Markov Model for the Term Structure of Credit Risk Spreads (1997)
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