Decomposition of default probability under a structural credit risk model with jumps (Q1936262)

The authors study the default probability under the jump-diffusion model. The specific feature of their approach is the decomposition of default probability into two parts, the default probability caused by a jump and by oscillation, respectively. The aim is to investigate whether the jump component or the diffusion component makes a bigger contribution to the long-term and short-term default probabilities. Explicit expressions for the Laplace transforms of the times of default caused by a jump and by oscilation, are given. Based on these results, some numerical calculations for the default probabilities are given. Twice continuously differentiable property of the Laplace transforms is proved.