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Document Details : Title: A Note on Credit Insurance Author(s): LEITNER, Johannes Journal: ASTIN Bulletin Volume: 36 Issue: 2 Date: 2006 Pages: 347-360 DOI: 10.2143/AST.36.2.2017925 Abstract : In a simple stationary setting with constant interest rate, we derive pricing formulas for defaultable bonds with stochastic recovery rate using a replication argument. Replication is done by using an insurance contract (i.e. a kind of credit default swap), the price of which is determined by a dynamic premium calculation principle.We consider two cases, a linear one, where pricing amounts to solving an inhomogeneous linear ODE, and a super-linear case where a Riccati ODE has to be solved. |