IDEAS home Printed from https://ideas.repec.org/a/rsk/journ0/2160342.html
   My bibliography  Save this article

Modeling correlated defaults: first passage model under stochastic volatility

Author

Listed:
  • Jean-Pierre Fouque, Brian C. Wignall, Xianwen Zhou

Abstract

ABSTRACT Default dependency structure is crucial in pricing multi-name credit derivatives as well as in credit risk management. In this paper, we extend the first passage model for one name with stochastic volatility (Fouque et al 2006) to the multi-name case. Correlation of defaults is generated by correlation between the Brownian motions driving the individual names as well as through common stochastic volatility factors. A numerical example for the loss distribution of a portfolio of defaultable bonds is examined after stochastic volatility is incorporated.

Suggested Citation

Handle: RePEc:rsk:journ0:2160342
as

Download full text from publisher

File URL: https://www.risk.net/system/files/import/protected/digital_assets/9887/Modeling_correlated_defaults.pdf
Download Restriction: no
---><---

More about this item

Statistics

Access and download statistics

Corrections

All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rsk:journ0:2160342. See general information about how to correct material in RePEc.

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

We have no bibliographic references for this item. You can help adding them by using this form .

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thomas Paine (email available below). General contact details of provider: https://www.risk.net/journal-of-computational-finance .

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.