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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.

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