Heat Kernel Approach to modelling of Defaultable Markets

Lunedi' 14 Marzo 2011 - Prof. Takahiro Tsuchiya


Lunedi' 14 marzo alle ore 11.30 in Sala Riunioni al piano VII, scala B, il Prof. Takahiro Tsuchiya della Ritsumeikan University (Giappone) terra' un seminario dal titolo "Heat Kernel Approach to modelling of Defaultable Markets".

To construct a no-arbitrage defaultable bond market, we work on the state price density framework. Using the heat kernel approach (HKA, shortly) with the killing of a Markov process, we construct a single defaultable bond market that enables explicit expressions of the defaultable bonds and the credit spreads under quadratic Gaussian settings. Some simulation results show that the model is not only tractable but realistic.

Rif. int. T. Vargiolu