Abstract
AbstractIn this article, a framework for the joint modelling of default and recovery risk is presented. The model accounts for typical characteristics known from empirical studies, e.g. negative correlation between recovery‐rate process and default intensity, as well as between default intensity and state of the economy, and a positive dependence of recovery rates on the economic environment. Within this framework analytically tractable pricing formulas for credit derivatives are derived. The stochastic model for the recovery process allows for the pricing of credit derivatives with payoffs that are directly linked to the recovery rate at default, e.g. recovery locks. Copyright © 2009 John Wiley & Sons, Ltd.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callMore From: Applied Stochastic Models in Business and Industry
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
