Abstract.
The pricing problems of credit derivatives have received much attention in the last decade. An important unresolved problem, however, is the pricing of credit derivatives under the general environment in which the interest rate process and the hazard rate process are stochastic. This article addresses the pricing problems of credit derivatives by the asymptotic expansion approach. This approach has only recently been introduced to mathematical finance, and it enables us to evaluate credit derivatives under a widely adapted class of models. We also present a numerical study.
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JEL Classification:
G13
Mathematics Subject Classification (2000):
62E20, 91B24, 91B28
I am grateful to Professor N. Kunitomo for kind and valuable discussions and comments. I thank Professor P. Blamey for assistance with English expression. I also wish to thank the anonymous referee and the editor for many helpful comments.
Manuscript received: June 2003; final version received: August 2004
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Muroi, Y. Pricing contingent claims with credit risk: Asymptotic expansion approach. Finance Stochast. 9, 415–427 (2005). https://doi.org/10.1007/s00780-004-0147-2
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DOI: https://doi.org/10.1007/s00780-004-0147-2