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Default Times in a Continuous Time Markov Chain Economy

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  • Elliott
  • van der Hoek

Abstract

A continuous time financial market is considered where randomness is modelled by a finite state Markov chain. Using the chain, a stochastic discount factor is defined. The probability distributions of default times are shown to be given by solutions of a system of coupled partial differential equations.

Suggested Citation

  • Elliott & van der Hoek, 2013. "Default Times in a Continuous Time Markov Chain Economy," Applied Mathematical Finance, Taylor & Francis Journals, vol. 20(5), pages 450-460, November.
    • Handle: RePEc:taf:apmtfi:v:20:y:2013:i:5:p:450-460
    DOI: 10.1080/1350486X.2012.755825
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    Cited by:

    1. Hoang Van Khieu & Roberto Leon-Gonzalez, 2024. "The distributions of annual earnings and interest rates in a continuous time Markov chain economy," Economics Bulletin, AccessEcon, vol. 44(3), pages 1096-1108.

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