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Pde Approach To The Valuation And Hedging Of Basket Credit Derivatives

Author

Listed:
  • MAREK RUTKOWSKI

    (School of Mathematics and Statistics, University of New South Wales, Sydney, NSW 2052, Australia)

  • KHAN YOUSIPH

    (School of Mathematics and Statistics, University of New South Wales, Sydney, NSW 2052, Australia)

Abstract

The goal of this work is to examine the PDE approach to the valuation and hedging of defaultable claims in a Markovian model of credit risk. Our approach is based on the previous work by Bielecki et al. [3]. We extend the results in [3] by considering a general credit risk model, in which the number of traded assets, the dimension of the driving Brownian motion, as well as the number of default times are arbitrary.

Suggested Citation

  • Marek Rutkowski & Khan Yousiph, 2007. "Pde Approach To The Valuation And Hedging Of Basket Credit Derivatives," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 10(08), pages 1261-1285.
    • Handle: RePEc:wsi:ijtafx:v:10:y:2007:i:08:n:s0219024907004640
    DOI: 10.1142/S0219024907004640
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    Cited by:

    1. Wenqiong, Liu & Li, Shenghong, 2016. "Hedging default risks of CDO tranches in non-homogeneous Markovian contagion models," Applied Mathematics and Computation, Elsevier, vol. 291(C), pages 279-291.
    2. Wen-Qiong Liu & Wen-Li Huang, 2019. "Hedging Of Synthetic Cdo Tranches With Spread And Default Risk Based On A Combined Forecasting Approach," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 22(02), pages 1-17, March.
    3. Cherubini, Umberto, 2021. "Estimating redenomination risk under Gumbel–Hougaard survival copulas," Journal of Economic Dynamics and Control, Elsevier, vol. 133(C).
    4. Zura Kakushadze & Juan Andrés Serur, 2018. "151 Trading Strategies," Springer Books, Springer, number 978-3-030-02792-6, October.

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