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Stochastic Evolution Equations in Portfolio Credit Modelling

Abstract:

We consider a structural credit model for a large portfolio of credit risky assets where the correlation is due to a market factor. By considering the large portfolio limit of this system we show the existence of a density process for the asset values. This density evolves according to a stochastic partial differential equation, and we establish existence and uniqueness for the solution taking values in a suitable function space. The loss function of the portfolio is then a function of the ev...

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Publication status:
Published

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Publisher copy:
10.1137/100796777

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More by this author
Institution:
University of Oxford
Department:
Oxford, MPLS, Mathematical Inst
Role:
Author
More by this author
Institution:
University of Oxford
Department:
Oxford, MPLS, Mathematical Inst
Role:
Author
Journal:
SIAM JOURNAL ON FINANCIAL MATHEMATICS
Volume:
2
Issue:
1
Pages:
627-664
Publication date:
2011-01-01
DOI:
EISSN:
1945-497X
ISSN:
1945-497X
URN:
uuid:42bfea41-ce12-4e4c-82c0-e484a618f9a2
Source identifiers:
404933
Local pid:
pubs:404933

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