Multiscale analysis on the pricing of intensity-based defaultable bonds

DOI10.1155/2013/287425MaRDI QIDQ2375480zbMATH OpenOpenAlexDBLPWikidataFDO

Authors Sun-Hwa Cho, Jeong-Hoon Kim, Yong-Ki Ma

Publication date 14 June 2013

Published in Journal of Applied Mathematics (Search for Journal in Brave)

Copyright license Creative Commons Attribution 4.0 International

Full work available at URL https://doi.org/10.1155/2013/287425

Mathematics Subject Classification ID

Review text

Summary: This paper studies the pricing of intensity-based defaultable bonds where the volatility of default intensity is assumed to be random and driven by two different factors varying on fast and slow time scales. Corrections to the constant intensity of default are obtained and then how these corrections influence the term structure of interest rate derivatives is shown. The results indicate that the fast scale correction produces a more significant impact on the bond price than the slow scale correction and the impact tends to increase as time to maturity increases.

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Cites work

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Cited in

(5)

• Valuation of credit derivatives with multiple time scales in the intensity model
• Stochastic volatility asymptotics of defaultable interest rate derivatives under a quadratic Gaussian model
• Stochastic Volatility Effects on Defaultable Bonds
• scientific article; zbMATH DE number 2020182 (Why is no real title available?)
• scientific article; zbMATH DE number 1867087 (Why is no real title available?)

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