We found a match
Your institution may have access to this item. Find your institution then sign in to continue.
- Title
Default risk in interest rate derivatives with stochastic volatility.
- Authors
Kim, Bomi; Kim, Jeong-Hoon
- Abstract
In this study, we consider short interest rate models of the Vascicek type with stochastic volatility and obtain formulas for default risk in interest rate derivatives. Corrections from a fast mean-reverting stochastic volatility are computed to show how they can affect the term structure of the interest rate derivatives. Our results for the defaultable bonds as well as the corresponding bond options are obtained as an extension of the non-defaultable case studied by Cotton et al. [Math. Finance, 2004, 14(2), 173–200].
- Subjects
MARKET volatility; ARBITRAGE pricing theory; CREDIT risk; CREDIT derivatives; INTEREST rates; STOCHASTIC analysis; BONDS (Finance); DEFAULT (Finance)
- Publication
Quantitative Finance, 2011, Vol 11, Issue 12, p1837
- ISSN
1469-7688
- Publication type
Academic Journal
- DOI
10.1080/14697688.2010.543426