An analytically tractable time-changed jump-diffusion default intensity model

Name: Kind
Address: 3rd Floor, 2 Broadway, Nottingham, NG1 1PS, United Kingdom
Telephone: +44-115-727-0990
Price range: $$$

Abstract: We present a stochastic default intensity model where the intensity follows a tractable jump-diffusion process obtained by applying a deterministic change of time to a non mean-reverting square root jump-diffusion process. The model generates higher implied volatilities for default swaptions than mean-reverting versions, consistent with volatility levels observed on the market.

Published on	5 September 2011
Authors	Naoufel El-Bachir, Damiano Brigo
Series Reference	2008-06