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PDE approach to valuation and hedging of credit derivatives
Authors:
Tomasz R. Bielecki a;
Monique Jeanblanc b;
Marek Rutkowski cd
| Affiliations: | a Department of Applied Mathematics, Illinois Institute of Technology, Chicago, IL 60616, USA |
b D partement de Mathmatiques, Universit d' vry Val d'Essonne, 91025 vry Cedex, France |
|
| c School of Mathematics, University of New South Wales, Sydney, NSW 2052, Australia | |
| d Faculty of Mathematics and Information Science, Warsaw University of Technology, 00-661 Warszawa, Poland |
DOI:
10.1080/14697680500149297
Publication Frequency:
8 issues per year
Number of References: 9
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Abstract
This paper presents a PDE approach in a Markovian setting to hedge defaultable derivatives. The arbitrage price and the hedging strategy for an attainable contingent claim are described in terms of solutions of a pair of coupled PDEs. For some standard examples of defaultable claims, we provide explicit formulae for prices and hedging strategies.
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| Keywords: Credit derivatives; Hedging; Valuation; PDE approach |
| view references (9) |
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