Ambiguity in defaultable term structure models
Tolulope Fadina and
Papers from arXiv.org
We introduce the concept of no-arbitrage in a credit risk market under ambiguity considering an intensity-based framework. We assume the default intensity is not exactly known but lies between an upper and lower bound. By means of the Girsanov theorem, we start from the reference measure where the intensity is equal to $1$ and construct the set of equivalent martingale measures. From this viewpoint, the credit risky case turns out to be similar to the case of drift uncertainty in the $G$-expectation framework. Finally, we derive the interval of no-arbitrage prices for general bond prices in a Markovian setting.
New Economics Papers: this item is included in nep-upt
Date: 2018-01, Revised 2018-04
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed
Downloads: (external link)
http://arxiv.org/pdf/1801.10498 Latest version (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1801.10498
Access Statistics for this paper
More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().