2010/03/22 by Régis Houssou, Regis Houssou, Olivier Besson +2
Decision Sciences · Economics, Econometrics and Finance · #Computational Finance (q-fin.CP) #Credit Risk and Financial Regulations #FOS: Economics and business #Risk and Portfolio Optimization #Stochastic processes and financial applications #q-fin.CP
paper · pdf · doi:10.48550/arxiv.1003.4118
arxiv created 2010/03/22 · openalex publication_date 2010/03/22 · arxiv updated 2010/03/23 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
The utility-based pricing of defaultable bonds in the case of stochastic intensity models of default risk is discussed. The Hamilton-Jacobi- Bellman (HJB) equations for the value functions is derived. A finite difference method is used to solve this problem. The yield-spreads for both buyer and seller are extracted. The behaviour of the spread curve given the default intensity is analyzed. Finally the impacts of the risk aversion and the correlation coefficient are discussed.