Multiple defaults and contagion risks

Ying Jiao (1)

1 LPMA - Laboratoire de Probabilités et Modèles Aléatoires

We study multiple defaults where the global market information is modelled as progressive enlargement of filtrations. We shall provide a general pricing formula by establishing a relationship between the enlarged filtration and the reference default-free filtration in the random measure framework. On each default scenario, the formula can be interpreted as a Radon-Nikodym derivative of random measures. The contagion risks are studied in the multi-defaults setting where we consider the optimal investment problem in a contagion risk model and show that the optimization can be effectuated in a recursive manner with respect to the default-free filtration.

Domaines: Gestion de portefeuilles [q-fin.PM]; Probabilités [math.PR]

Ying Jiao. Multiple defaults and contagion risks. 2009. ⟨hal-00441500⟩