DocumentCode
2822588
Title
Credit Risk Pricing with Multivariate Stochastic Volatility
Author
Du, Jun ; Liu, Yang
Author_Institution
Changsha Univ. of Sci. & Technol., Changsha, China
Volume
2
fYear
2009
fDate
24-26 April 2009
Firstpage
526
Lastpage
530
Abstract
This paper extends to the multi-assets framework the closed-form solution for options with stochastic volatility derived in Heston(1993) and Ball and Roma(1994). This extension introduces a risk premium in the return equation and considers Wishart dynamics for the process of the stochastic volatility matrix, which is the multi-assets simulation of the model of Cox, Ingersoll, and Ross(1985). This approach is used to extend Mertonpsilas model for corporate default to a framework with stochastic liability.
Keywords
matrix algebra; pricing; risk analysis; stochastic processes; Merton model; Wishart dynamics; closed-form solution; credit risk pricing; multivariate stochastic volatility; return equation; risk premium; stochastic liability; stochastic volatility matrix; Closed-form solution; Covariance matrix; Discrete wavelet transforms; Equations; Fluctuations; Numerical simulation; Pricing; Stochastic processes; Symmetric matrices; Usability;
fLanguage
English
Publisher
ieee
Conference_Titel
Computational Sciences and Optimization, 2009. CSO 2009. International Joint Conference on
Conference_Location
Sanya, Hainan
Print_ISBN
978-0-7695-3605-7
Type
conf
DOI
10.1109/CSO.2009.50
Filename
5194008
Link To Document