Modeling and pricing credit risk with a focus on recovery risk

IF 3.6 2区经济学 Q1 BUSINESS, FINANCE

Journal of Banking & Finance Pub Date : 2024-10-22 DOI:10.1016/j.jbankfin.2024.107317

Haibo Liu , Qihe Tang

引用次数: 0

Abstract

Consider a defaultable bond traded in a financial market that is subject to shocks and regime shifts. Its recovery payment has a hybrid structure, comprising two components: one contingent on historical information up to the time of default, and the other an independent variable indexed by the regime at the time of default. The default intensity, interest rate, and reference rate are assumed to be general deterministic functions of certain state variables, while these state variables jointly follow a jump-diffusion process, with drift and volatility coefficients governed by the regime and with jumps induced by shocks. We construct a risk-neutral pricing measure that prices all risk sources in an integrated manner. A rigorous verification of this pricing measure reveals the corresponding time-dependent market prices of these risk sources. The resulting pricing framework is applicable to most defaultable bonds and credit derivatives.

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信用风险建模和定价，重点是回收风险

考虑一种在金融市场上交易的违约债券，这种债券会受到冲击和制度转变的影响。它的回收付款具有混合结构，由两部分组成：一部分取决于违约发生前的历史信息，另一部分是由违约发生时的制度指数化的独立变量。违约强度、利率和参考利率被假定为某些状态变量的一般确定性函数，而这些状态变量共同遵循一个跳跃-扩散过程，其漂移和波动系数由制度决定，跳跃由冲击引起。我们构建了一种风险中性的定价方法，可以对所有风险源进行综合定价。对这一定价方法的严格验证揭示了这些风险源相应的随时间变化的市场价格。由此产生的定价框架适用于大多数违约债券和信用衍生品。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

Journal of Banking & Finance Multiple-

CiteScore

6.40

自引率

5.40%

发文量

262

期刊介绍： The Journal of Banking and Finance (JBF) publishes theoretical and empirical research papers spanning all the major research fields in finance and banking. The aim of the Journal of Banking and Finance is to provide an outlet for the increasing flow of scholarly research concerning financial institutions and the money and capital markets within which they function. The Journal''s emphasis is on theoretical developments and their implementation, empirical, applied, and policy-oriented research in banking and other domestic and international financial institutions and markets. The Journal''s purpose is to improve communications between, and within, the academic and other research communities and policymakers and operational decision makers at financial institutions - private and public, national and international, and their regulators. The Journal is one of the largest Finance journals, with approximately 1500 new submissions per year, mainly in the following areas: Asset Management; Asset Pricing; Banking (Efficiency, Regulation, Risk Management, Solvency); Behavioural Finance; Capital Structure; Corporate Finance; Corporate Governance; Derivative Pricing and Hedging; Distribution Forecasting with Financial Applications; Entrepreneurial Finance; Empirical Finance; Financial Economics; Financial Markets (Alternative, Bonds, Currency, Commodity, Derivatives, Equity, Energy, Real Estate); FinTech; Fund Management; General Equilibrium Models; High-Frequency Trading; Intermediation; International Finance; Hedge Funds; Investments; Liquidity; Market Efficiency; Market Microstructure; Mergers and Acquisitions; Networks; Performance Analysis; Political Risk; Portfolio Optimization; Regulation of Financial Markets and Institutions; Risk Management and Analysis; Systemic Risk; Term Structure Models; Venture Capital.