Abstract
The goal of this paper is to study the immersion property through its links with credit risk modelling. The construction of a credit model by the enlargement of a reference filtration with the progressive knowledge of a credit event occurrence has become a standard for reduced form modelling. It is known that such a construction rises mathematical difficulties, mainly relied to the properties of the random time. Whereas the invariance of the property of semi-martingale in the enlargement is implied by the absence of arbitrage, we address in this paper the question of the invariance of the martingale property.
This research benefited from the support of the “Chaire Risque de Crédit”, Fédération Bancaire Française.
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Jeanblanc, M., Le Cam, Y. (2009). Immersion Property and Credit Risk Modelling. In: Optimality and Risk - Modern Trends in Mathematical Finance. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-02608-9_6
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DOI: https://doi.org/10.1007/978-3-642-02608-9_6
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