Journal of Systems Science and Complexity

, Volume 32, Issue 2, pp 657–680 | Cite as

Pricing of Defaultable Securities Associated with Recovery Rate Under the Stochastic Interest Rate Driven by Fractional Brownian Motion

  • Qing ZhouEmail author
  • Qian WangEmail author
  • Weixing WuEmail author


This paper considers an improved model of pricing defaultable bonds under the assumption that the interest rate satisfies the Vasicek model driven by fractional Brownian motion (fBm for short) based on the counterparty risk framework of Jarrow and Yu (2001). The authors use the theory of stochastic analysis of fBm to derive pricing formulas for the defaultable bonds and study how the counterparty risk, recovery rate, and the Hurst parameter affect the values of the defaultable bonds. Numerical experiment results are presented to demonstrate the findings.


Counterparty risk defaultable bond fractional Brownian motion recovery rate Vasicek model 


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Copyright information

© The Editorial Office of JSSC & Springer-Verlag GmbH Germany 2019

Authors and Affiliations

  1. 1.School of ScienceBeijing University of Posts and TelecommunicationsBeijingChina
  2. 2.School of Banking and FinanceUniversity of International Business and EconomicsBeijingChina

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