Did anyone read schonbucher's book (credit derivatives pricing modes)?, pls help

Huanghanming · April 20th, 2010, 10:22 am

Did anyone read schonbucher's book (credit derivatives pricing models)?, pls help to answer some of my questions:1. On page 171, under the assumption 7.2, the dynamic of defaultable bond prices is But on page 181, it says "From assumption7.2, we know the dynamics of the defaultable bond prices are"My first question is how to derive this formula from the above assumption?

Huanghanming · April 20th, 2010, 10:28 am

2 On page 170, under "recovery of market value" assumption and Gaussian setting the defautable bond price at time t isthe above expression is adapted to the fitration generated by brownian motion, then how can it generate any jump in its dynamic?Thanks a lot!!

Alan · April 20th, 2010, 3:04 pm

read the first line top 182

Huanghanming · April 23rd, 2010, 12:59 pm

thanks for your reply. Do you mean the bond price is a conditional price or pre-default price? But in that case I think the jump term should be included in assumption 7.2. And should be the same as QuoteOriginally posted by: Alanread the first line top 182

Alan · April 23rd, 2010, 2:03 pm

I was just pointing out that he dropped the dN at the bottom of pg. 181 because heis just rewriting the bottom of pg 171 and assuming t is prior to the jump. Since youseem to recognize that, I'm not sure what the issue is.

Huanghanming · April 28th, 2010, 7:42 am

Hi, my question is, if the pre-default (or conditional) bond prices are adapted to the filtration generated by Brownian motions, how to introduce a jump term into the dynamics of the unconditional bond prices (or how to derive the dynamics of the unconditional bond prices from the conditional pricing formula)?Are there any articles about this subject? Thanks!