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Article: A multivariate regime-switching mean reverting process and its application to the valuation of credit risk

TitleA multivariate regime-switching mean reverting process and its application to the valuation of credit risk
Authors
KeywordsCommon shock
Counterparty risk
Credit default swap
First-to-default basket swap
Multivariate regime-switching shot noise process
Issue Date2014
PublisherTaylor & Francis Inc. The Journal's web site is located at http://www.tandf.co.uk/journals/titles/07362994.asp
Citation
Stochastic Analysis and Applications , 2014, v. 32 n. 4, p. 687-710 How to Cite?
AbstractIn this article, we study the counterparty risk on a credit default swap (CDS) and the valuation of a first-to-default basket swap on three underlyings under a common shock model with regime-switching intensities. We assume that the defaults of all the names are driven by some shock events, whose arrivals are governed by a multivariate regime-switching shot noise process. Based on some expressions for the joint Laplace transform of the regime-switching shot noise processes, we give explicit formulas for the spread of the CDS contract with and without counterparty risk and the spread of the first-to-default basket swap on the three underlyings.
Persistent Identifierhttp://hdl.handle.net/10722/199240
ISSN
2019 Impact Factor: 1.035
2015 SCImago Journal Rankings: 0.590
ISI Accession Number ID

 

DC FieldValueLanguage
dc.contributor.authorDong, Y-
dc.contributor.authorYuen, KC-
dc.contributor.authorWu, C-
dc.date.accessioned2014-07-22T01:09:56Z-
dc.date.available2014-07-22T01:09:56Z-
dc.date.issued2014-
dc.identifier.citationStochastic Analysis and Applications , 2014, v. 32 n. 4, p. 687-710-
dc.identifier.issn0736-2994-
dc.identifier.urihttp://hdl.handle.net/10722/199240-
dc.description.abstractIn this article, we study the counterparty risk on a credit default swap (CDS) and the valuation of a first-to-default basket swap on three underlyings under a common shock model with regime-switching intensities. We assume that the defaults of all the names are driven by some shock events, whose arrivals are governed by a multivariate regime-switching shot noise process. Based on some expressions for the joint Laplace transform of the regime-switching shot noise processes, we give explicit formulas for the spread of the CDS contract with and without counterparty risk and the spread of the first-to-default basket swap on the three underlyings.-
dc.languageeng-
dc.publisherTaylor & Francis Inc. The Journal's web site is located at http://www.tandf.co.uk/journals/titles/07362994.asp-
dc.relation.ispartofStochastic Analysis and Applications-
dc.rightsThis is an electronic version of an article published in Stochastic Analysis and Applications. The article is available online at: http://dx.doi.org/10.1080/07362994.2014.917430.-
dc.subjectCommon shock-
dc.subjectCounterparty risk-
dc.subjectCredit default swap-
dc.subjectFirst-to-default basket swap-
dc.subjectMultivariate regime-switching shot noise process-
dc.titleA multivariate regime-switching mean reverting process and its application to the valuation of credit risk-
dc.typeArticle-
dc.identifier.emailYuen, KC: kcyuen@hku.hk-
dc.identifier.authorityYuen, KC=rp00836-
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1080/07362994.2014.917430-
dc.identifier.scopuseid_2-s2.0-84902469281-
dc.identifier.hkuros231687-
dc.identifier.volume32-
dc.identifier.issue4-
dc.identifier.spage687-
dc.identifier.epage710-
dc.identifier.isiWOS:000337940900008-
dc.publisher.placeUnited States-
dc.identifier.issnl0736-2994-

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