Proceedings of the ISCIE International Symposium on Stochastic Systems Theory and its Applications
Online ISSN : 2188-4749
Print ISSN : 2188-4730
第42回ISCIE「確率システム理論と応用」国際シンポジウム(2010年11月, 岡山)
HKA to Single Defaultable Bond
Yūta InoueTakahiro Tsuchiya
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2011 年 2011 巻 p. 96-101

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To construct a no-arbitrage defaultable bond market, we work on the state price density framework. Using the heat kernel approach (HKA, shortly) with the killing of a Markov process, we construct a single defaultable bond market that enables explicit expressions of the defaultable bonds and the credit spreads under quadratic Gaussian settings. Some simulation results show that the model is not only tractable but realistic.
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© 2011 ISCIE Symposium on Stochastic Systems Theory and Its Applications
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