Seminario Dottorato: Understanding Defaults

Wednesday 18 January 2012 - Juan Miguel A. Montes

ARGOMENTI: Seminari Dottorato

Wednesday 18 January 2012 h. 16:00, room 1AD100
Juan Miguel A. Montes (Padova, Dip. Mat.)
"Understanding Defaults"

The possibility that a debtor may default poses a big risk to investors. Such a risk, called credit risk, is one of the risks present in financial markets. It is traditionally modelled in isolation from other kinds of risk such as the risk due to volatility, known as equity risk. In fact equity risk is observed to be connected to credit risk.
In this talk, we provide a discussion of the basic credit risk models and the pricing of credit risky derivatives. We also discuss the Fourier Transform approach to pricing, developed by Carr and Madan. Using the Fourier Transform approach, we can price options under a model of risky assets proposed by Fontana, that treats credit risk and equity risk jointly. Finally with time permitting we discuss the application of this approach to a defaultable Heston model.

Rif. int. C. Marastoni, T. Vargiolu

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