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A Defaultable Financial Market with Complete Information

  • I. Venkat Appal Raju
Conference paper
Part of the Lecture Notes in Electrical Engineering book series (LNEE, volume 327)

Abstract

We consider a Markov-modulated defaultable Brownian market and price the defaultable contingent claims with the intensity-based methodology using the fair price concept under the benchmark approach. We also derive the locally risk-minimizing hedging strategy for defaultable contingent claims under the benchmark approach. We assume that the default intensity and the stock price parameters are modulated by a Markov process. The recovery processes are assumed to have random payments at default time as well as at the maturity of the claims.

Keywords

Credit Risk Price Process Martingale Measure Hedging Strategy Wealth Process 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer India 2015

Authors and Affiliations

  1. 1.Indian Institute of Technology JodhpurJodhpurIndia

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