Abstract
The default compensation of corporate bonds is a significant part of risk management. In this research, algorithm of the Kalman filter is applied in modeling of jump-risk compensation. Default probability and default intensity are two important variables for the jump-risk compensation. In the modeling process, the parameter method of maximum likelihood estimation is used to obtain the default probability, and the default intensity under real measure is transformed into default intensity under equivalent martingale measure, which could be obtained from the differential equations under the equivalent martingale measure. The compensation model is established by solving the default probability function.
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 callDisclaimer: 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.
