OK, by now I've found that,see Duffie (1998), "First-to-Default Valuation".Unfortunately I'm not sure how to incorporate the zero bond...

<t>Hi,I'm trying to calibrate the intensity process in the standard CDS pricing formula. Assuming - independence between recovery payment and default,- recovery as being randomly distributed in the default leg, yields.Pan; Singleton (2005), "Default and Recovery Implicit in the Term Structure of Sov...

D'uh, I forgot that A(t,T) to F(t,T) are actually functions... Differentiation is just a "tool" we use to get from the standard pricing kernel to the extended one. There is no "reasoning" behind the step.Thanks, Alan!

Alright, thanks. But why would I differentiate with respect to the scalars A and B (which in reality are a matrix and a vector)? Shouldn't I differentiate with respect to a variable like the time or -- as you already denied -- the process X?

Unfortunately my stochastic calculous skills are not up to speed, yet. Can you guide me into the right direction? How do I actually differentiate such an expression and for what? Do differentiate with respect to X_t? Thanks!

<t>Awe sweet! You're right! Note Christensen's hint towards Duffie, Pan, Singleton (2000), "Transform Analysis and Asset Pricing for Affine Jump-Diffusions". DPS say "The extended transform [...] can be computed by differentiation of the transform [...], just as moments can be computed from a moment...

<t>Hi,I'm trying to get my head around the "extended quadratic pricing kernel" used by Christensen, Jens H.E. (2006), "Joint Estimation of Default and Recovery Risk: A Simulation Study", to compute the expected value of the recovery payment term in your typical CDS pricing model (i.e. ). The extende...

<t>Hi everyone,I'm currently writing my master's thesis on the performance of different CDO pricing models before and throughout the credit crisis. My goal is to compare the actual market mid-spreads for the DJ CDX IG and DJ iTraxx Europe with the fair spreads determined by the pricing models. The f...