Fadina, Tolulope and Schmidt, Thorsten (2019) 'Default Ambiguity.' Risks, 7 (2). p. 64. ISSN 2227-9091
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Official URL: https://doi.org/10.3390/risks7020064
Abstract
This paper discusses ambiguity in the context of single-name credit risk. We focus on uncertainty in the default intensity but also discuss uncertainty in the recovery in a fractional recovery of the market value. This approach is a first step towards integrating uncertainty in credit-risky term structure models and can profit from its simplicity. We derive drift conditions in a Heath–Jarrow–Morton forward rate setting in the case of ambiguous default intensity in combination with zero recovery, and in the case of ambiguous fractional recovery of the market value.
Item Type: | Article |
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Uncontrolled Keywords: | model ambiguity; default time; credit risk; no-arbitrage; reduced-form HJM models; recovery process |
Divisions: | Faculty of Science and Health Faculty of Science and Health > Mathematical Sciences, Department of |
SWORD Depositor: | Elements |
Depositing User: | Elements |
Date Deposited: | 12 Jan 2021 14:56 |
Last Modified: | 06 Jan 2022 14:16 |
URI: | http://repository.essex.ac.uk/id/eprint/28244 |
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