文章基本信息

标题：On a convergent power series method to price defaultable bonds in a Vasicek-CIR model
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作者：Fabio Antonelli ; Alessandro Ramponi ; Sergio Scarlatti 等
期刊名称：Electronic Communications in Probability
印刷版ISSN：1083-589X
出版年度：2022
卷号：27
页码：1-12
DOI：10.1214/22-ECP458
语种：English
出版社：Electronic Communications in Probability
摘要：In this paper, we prove that the price of a defaultable bond, under a Vasicek short rate dynamics coupled with a Cox-Ingersoll-Ross default intensity model, is a real analytic function, in a neighborhood of the origin, of the correlation parameter between the Brownian motions driving the processes, used to express the dependence between the short rate and the default intensity of the bond issuer. Employing conditioning and a change of numéraire technique, we obtain a manageable representation of the bond price in this non-affine model which allows us to control its derivatives and assess the convergence of the series. By truncating the expansion at the second order, a quadratic approximation formula for the price is then provided. Finally, practical applications of the result are highlighted by performing a numerical comparison with alternative pricing methodologies.
关键词：26E05;91G30;91G60;analytical functions;change of numéraire;credit risk;defaultable bond pricing;Hazard process;non-affine models