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    The Rebate Value Process with Some Applications

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    Welch_ku_0099M_12863_DATA_1.pdf (232.0Kb)
    Issue Date
    2013-08-31
    Author
    Welch, Nathan M.
    Publisher
    University of Kansas
    Format
    46 pages
    Type
    Thesis
    Degree Level
    M.A.
    Discipline
    Mathematics
    Rights
    This item is protected by copyright and unless otherwise specified the copyright of this thesis/dissertation is held by the author.
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    Abstract
    In the pricing of credit derivatives default is modelled as a stopping time and prices are typically determined by separation of cash-flows before and at default. In a general risk-neutral valuation setting, this technique suggests the decomposition of an asset which holds even if the asset is not credit-sensitive. The rebate value process is introduced and related to the price of an asset before and after default. The financial interpretation of this process is different depending on the type of asset decomposed. An interpretation of recovery is illustrated by pricing several standard credit-sensitive assets including a risky coupon bond and a credit default swap (CDS). An interpretation of insurance is illustrated by pricing the complements of the credit ``building blocks'' with respect to the stopping time. Several applications of these complements are presented including a risky interest rate swap and a full-recovery CDS.
    URI
    http://hdl.handle.net/1808/12265
    Collections
    • Mathematics Dissertations and Theses [179]
    • Theses [3828]

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    785-864-8983

    KU Libraries
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    Lawrence, KS 66045
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    Contact KU ScholarWorks
    785-864-8983
    KU Libraries
    1425 Jayhawk Blvd
    Lawrence, KS 66045
    785-864-8983

    KU Libraries
    1425 Jayhawk Blvd
    Lawrence, KS 66045
    Image Credits
     

     

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