CREDIT RISK MODELINGnUNDER INFINITE ACTIVITY SWITCHING L'{e}VY PROCESSESnUSING FINITE DIFFERENCE METHODS
کد مقاله : 1164-FEMATH
نویسندگان:
1هادی محققی *، 2علی فروش باستانی، 1خسرو صافی
1دانشگاه تحصیلات تکمیلی زنجان
2عضو هیات علمی
چکیده مقاله:
In this paper, we develop an efficient numerical procedure based on finite differences to approximate the solution of a system of coupled partial integro-differential equations (PIDEs fornshort) arising from credit risk modeling inna market when the equity value of the firm has a dynamics given byna Markov-modulated pure jump infinite activity L'{e}vy process.nThe special case considered in this paper is a variance gamman(VG) process having no continuous martingale component and is an example of a pure jump process with an infinite number of jumps in any interval of time.nWenfirst give some details on the derivation of these PIDEs and thenndescribe the details of the numerical scheme to compute the default probabilities as well as pricing of defaultable bonds in a structural credit risk modeling frameworknwhen the recovery rate depends on the state of the economy.nSome numerical experiments are reported to show the effectiveness of the proposed approach.
کلیدواژه ها:
Regime-Switching, Infinite Activity L'{e}vy Process, CreditnRisk, Finite Difference Method, Default Probability, Defaultable Bond
وضعیت : مقاله برای ارائه شفاهی پذیرفته شده است