Utility valuation of credit derivatives: Single and two-name cases

Ronnie Sircar, Thaleia Zariphopoulou

Research output: Chapter in Book/Report/Conference proceedingChapter

11 Scopus citations

Abstract

We study the effect of risk aversion on the valuation of credit derivatives. Using the technology of utility-indiffierence valuation in intensity-based models of default risk, we analyze resulting yield spreads for single-name defaultable bonds and a simple representative two-name credit derivative. The impact of risk averse valuation on prices and yield spreads is expressed in terms of “effective correlation.”.

Original languageEnglish (US)
Title of host publicationApplied and Numerical Harmonic Analysis
PublisherSpringer International Publishing
Pages279-301
Number of pages23
Edition9780817645441
DOIs
StatePublished - Jan 1 2007

Publication series

NameApplied and Numerical Harmonic Analysis
Number9780817645441
ISSN (Print)2296-5009
ISSN (Electronic)2296-5017

All Science Journal Classification (ASJC) codes

  • Applied Mathematics

Keywords

  • Credit derivatives
  • indifference pricing
  • reaction–diffusion equations

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  • Cite this

    Sircar, R., & Zariphopoulou, T. (2007). Utility valuation of credit derivatives: Single and two-name cases. In Applied and Numerical Harmonic Analysis (9780817645441 ed., pp. 279-301). (Applied and Numerical Harmonic Analysis; No. 9780817645441). Springer International Publishing. https://doi.org/10.1007/978-0-8176-4545-8_15