Frey, Rüdiger, Runggaldier, Wolfgang. 2010. Pricing Credit Derivatives under Incomplete Information: a Nonlinear-Filtering Approach. Finance and Stochastics 14 (4): 495-526.

RIS

@ARTICLE{Frey2010,
title = {Pricing Credit Derivatives under Incomplete Information: a Nonlinear-Filtering Approach},
author = {Rüdiger Frey and Wolfgang Runggaldier},
year = {2010},
url = {http://www.math.uni-leipzig.de/~frey/frey-rungg-credit-filtering-revised.pdf},
volume = {14},
number = {4},
language = {EN},
pages = {495-526},
journal = {Finance and Stochastics},
abstract = {This paper considers a general reduced form pricing model for credit derivatives where default intensities are driven by some factor process X. The process X is not directly observable for investors in secondary markets; rather, their information set consists of the default history and of noisy price observation for traded credit products. In this context the pricing of credit derivatives leads to a challenging nonlinear filtering problem. We provide recursive updating rules for the filter, derive a finite dimensional filter for the case where X follows a finite state Markov chain and propose a novel particle filtering algorithm. A numerical case study illustrates the properties of the proposed algorithms.},
}