Credit Risk Models Based on Time Changed Brownian Motion - ICMS

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1 Overview2 Structural <strong>Credit</strong> Model: Black-Cox 19763 Time Changed Brownian Motion4 First passage time for time-changed BM5 Multifirm Jump-Diffusion Model6 Joint Equity-Default <strong>Models</strong>7 ConclusionTom Hurd (McMaster) Time Changed Brownian Motion ICMS 2007 2 / 20
Toronto: the place to be in 2010 !Where are you going to be in 2010 ?Tom Hurd (McMaster) Time Changed Brownian Motion ICMS 2007 3 / 20
Page 1: Credit Ris
Page 5 and 6: Toronto: the place to be in 2010 !W
Page 7 and 8: Toronto: the place to be in 2010 !W
Page 9 and 10: Two outstanding issues in credit ri
Page 11 and 12: Black-Cox (1976)A time-consistent m
Page 13 and 14: Other Approaches1 Reduced form mode
Page 15 and 16: Jump-Diffusion Default Mode
Page 17 and 18: First passage times for time-change
Page 19 and 20: Example1 Take L0 = 1;2 Take b = 0.0
Page 21 and 22: NumericsYield Spread0.35$L 0=0.3$0.
Page 23 and 24: Computing the Joint Default Distrib
Page 25 and 26: Risk Neutral Dynam
Page 31 and 32: Equity-Credit Comp
Page 33 and 34: Conclusion1 By taking Lt = X Gt wit

Credit Risk Models Based on Time Changed Brownian Motion - ICMS

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