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Please use this identifier to cite or link to this item: http://hdl.handle.net/10400.5/1204

Title: Term structure models with shot-noise effects
Authors: Gaspar, Raquel M.
Schmidt, Thorsten
Keywords: Term Structure Models
Quadratic Term Structure Models
Shot-noise processes
Issue Date: Jul-2007
Publisher: ISEG – Departamento de Gestão
Citation: Gaspar, Raquel M. e Thorsten Schmidt. 2007. "Term structure models with shot-noise effects". Instituto Superior de Economia e Gestão – Departamento de Gestão Working papers series 3-2007
Series/Report no.: Working papers series;3/2007
Abstract: This work proposes term structure models consisting of two parts: a part which can be represented in exponential quadratic form and a shot noise part. These term structure models allow for explicit expressions of various derivatives. In particular, they are very well suited for credit risk models. The goal of the paper is twofold. First, a number of key building blocks useful in term structure modelling are derived in closed-form. Second, these building blocks are applied to single and portfolio credit risk. This approach generalizes Duffie & Garleanu (2001) and is able to produce realistic default correlation and default clustering. We conclude with a specific model where all key building blocks are computed explicitly.
URI: http://hdl.handle.net/10400.5/1204
ISSN: 0874-8470
Appears in Collections:DG - Documentos de trabalho / Working Papers

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