Quotation Frey, Rüdiger. 2011. Pricing and hedging of Credit Derivatives via the Innovations Approach to Nonlinear Filtering. Workshop on incomplete information and filtering mathematical finance, Chemnitz, Deutschland, Juni.


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Abstract

We propose a new, information-based approach for modelling the dynamic evolution of a portfolio of credit risky securities. In our setup market prices of traded credit derivatives are given by the solution of a nonlinear filtering problem. The innovations approach to nonlinear filtering is used to solve this problem and to derive the dynamics of market prices. Moreover, the practical application of the model is discussed: we analyze model calibration, the pricing of exotic credit derivatives and the computation of risk-minimizing hedging strategies. The talk closes with a few numerical case studies.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Paper presented at an academic conference or symposium
Language English
Title Pricing and hedging of Credit Derivatives via the Innovations Approach to Nonlinear Filtering
Event Workshop on incomplete information and filtering mathematical finance
Year 2011
Date Juni
Country Germany
Location Chemnitz

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Frey, Rüdiger (Details)
Organization
Institute for Statistics and Mathematics IN (Details)
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