Credit Risk Models Based on Time Changed Brownian Motion - ICMS

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Numerics706030 Year Yield Spread CurvesNo JumpsMean jump size 0.3Mean jump size 1.0Mean jump size 3.0Yield Spread (in BPS)504030201000 5 10 15 20 25 30MaturityFigure: Thirty year yield spreads in basis points, c = 0.01 anda −1 = 0.30, 1.0, 3.0.Tom Hurd (McMaster) Time Changed Brownian Motion ICMS 2007 14 / 20
NumericsYield Spread0.35$L 0=0.3$0.3$L 0=0.6$0.25 $L =1.0$ 00.2 $L 0=2.0$0.150.130 Year Yield Spread Curves0.0500 5 10 15 20 25 30MaturityFigure: Thirty year yield spreads with four different valuesL 0 = 0.3, 0.6, 1.0, 2.0.Tom Hurd (McMaster) Time Changed Brownian Motion ICMS 2007 15 / 20
Page 1 and 2: Credit Ris
Page 3 and 4: 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: Example1 Take L0 = 1;2 Take b = 0.0
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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