Yongfeng WU

197178

Jump-diffusion CIR model and its applications in credit risk

Jump-diffusion CIR model and its applications in credit risk

In this paper, the author discusses the distribution of the jump-diffusion CIR model (JCIR) and its applications in credit risk. Applying the piecewise deterministic Markov process theory and martingale theory, we first obtain the closed forms of the Laplace transforms for the distribution of the jump-diffusion CIR model and its integrated process. Based on the obtained Laplace transforms, we derive the pricing of the defaultable zero-coupon bond and the fair premium of a Credit Default Swap (CDS) in a reduced form model of credit risk. Some numerical calculations are also provided.

Keywords:

jump-diffusion CIR model, reduced form model of credit risk, Laplace transform, defaultable zero-coupon bond Credit Default Swap,

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Hacettepe Journal of Mathematics and Statistics-Cover

Yayın Aralığı: 6
Başlangıç: 2002
Yayıncı: Hacettepe Üniversitesi Fen Fakultesi

Arşiv

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