大阪大学　数理・データ科学教育研究センター
Center for Mathematical Modeling and Data Science,Osaka University

A default contagion model from an information based perspective

Hideyuki Takada (Toho University)

1. ホーム
2. セミナー・集中講義
3. セミナー
4. A default contagion model from an information based perspective

大阪大学 数理・データ科学セミナー 金融・保険セミナーシリーズ 第112回

A default contagion model from an information based perspective

Hideyuki Takada (Toho University)

In this study, we introduce an extended model of the information based model of credit risk proposed by Brody, Hughston and Macrina (2010) to a multi-name case to investigate how default contagion risk influences the price fluctuation of defaultable discount bonds. Under the model with a couple of obligors, we derive a stochastic differential equation for one defaultable zero-recovery discount bond price process to reflect default contagion risk of a counterpart debt obligor. As a consequence, we find that the credit spread of the bond consists of not only the issuer's hazard rate but also the counterpart obligor's hazard rate adjusted with the ``pseudo-default loss'' rate. We also find that the bond price can jump at the default time of the counterpart by the amount dependent on the correlation between the issuer and the counterpart. Moreover, we numerically examine the impact of default contagion risk on some bond price components within the model.

Joint work with Hidetoshi Nakagawa (Hitotsubashi University)