Density approach in modelling successive defaults

Nicole El Karoui, Monique Jeanblanc () and Ying Jiao ()
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Nicole El Karoui: LPMA - Laboratoire de Probabilités et Modèles Aléatoires - UPMC - Université Pierre et Marie Curie - Paris 6 - UPD7 - Université Paris Diderot - Paris 7 - CNRS - Centre National de la Recherche Scientifique
Monique Jeanblanc: LaMME - Laboratoire de Mathématiques et Modélisation d'Evry - INRA - Institut National de la Recherche Agronomique - UEVE - Université d'Évry-Val-d'Essonne - CNRS - Centre National de la Recherche Scientifique
Ying Jiao: LSAF - Laboratoire de Sciences Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon

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Abstract: We apply the default density framework developed in El Karoui et al. \cite{ejj1} to modelling of multiple defaults, which can be adapted to both top-down and bottom-up models. We present general pricing results and establish links with the classical intensity approach. Explicit models are also proposed by using the methods of change of probability measure or dynamic copula.

Date: 2015-01-15
Note: View the original document on HAL open archive server: https://hal.science/hal-00870492v1
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Citations: View citations in EconPapers (6)

Published in SIAM Journal on Financial Mathematics, 2015, 6 (1), pp.1-21

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