What happens after a default: the conditional density approach

Abstract : We present a general model for default time, making precise the role of the intensity process, and showing that this process allows for a knowledge of the conditional distribution of the default only ``before the default". This lack of information is crucial while working in a multi-default setting. In a single default case, the knowledge of the intensity process does not allow to compute the price of defaultable claims, except in the case where immersion property is satisfied. We propose in this paper the density approach for default time. The density process will give a full characterization of the links between the default time and the reference filtration, in particular ``after the default time". We also investigate the description of martingales in the full filtration in terms of martingales in the reference filtration, and the impact of Girsanov transformation on the density and intensity processes, and also on the immersion property.
Type de document :
Pré-publication, Document de travail
2009
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https://hal.archives-ouvertes.fr/hal-00381090
Contributeur : Ying Jiao <>
Soumis le : mardi 5 mai 2009 - 11:04:17
Dernière modification le : vendredi 10 février 2017 - 01:12:55
Document(s) archivé(s) le : jeudi 10 juin 2010 - 22:44:11

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  • HAL Id : hal-00381090, version 1
  • ARXIV : 0905.0559

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Nicole El Karoui, Monique Jeanblanc, Ying Jiao. What happens after a default: the conditional density approach. 2009. <hal-00381090>

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