Filtering and Incomplete Information in Credit Risk

Rüdiger Frey, T Schmidt

Publikation: Beitrag in Buch/KonferenzbandBeitrag in Sammelwerk


This chapter studies structural and reduced-form credit risk models under incomplete information using techniques from stochastic filtering. We start with a brief introduction
to stochastic filtering. Next we cover the pricing of corporate securities (debt and equity)
in structural models under partial information. Furthermore we study the construction of a dynamic reduced-form credit risk model via the innovations approach to nonlinear filtering, and we discuss pricing, calibration and hedging in that context. The paper
closes with a number of numerical case studies related to model calibration and the
pricing of credit index options.
Titel des SammelwerksRecent Advancements in the Theory and Practice of Credit Derivatives
Herausgeber*innen D. Brigo, T. Bielecki, F. Patras
ErscheinungsortNew Jersey
PublikationsstatusVeröffentlicht - 1 Mai 2011