A NON-HOMOGENEOUS SEMI-MARKOV REWARD MODEL FOR THE CREDIT SPREAD COMPUTATION-Reference-Cited by-同舟云学术

A NON-HOMOGENEOUS SEMI-MARKOV REWARD MODEL FOR THE CREDIT SPREAD COMPUTATION

Published:2011-03 Issue:02 Volume:14 Page:221-238
ISSN:0219-0249
Container-title:International Journal of Theoretical and Applied Finance
language:en
Short-container-title:Int. J. Theor. Appl. Finan.

Author:

D'AMICO GUGLIELMO¹,JANSSEN JACQUES²,MANCA RAIMONDO³

Affiliation:

1. Drug Sciences Department, University "G. D'Annunzio", via dei Vestini 31, Chieti, 66013, Italy

2. CESIAF, Bld Paul Janson, 84 bte 9, Charleroi, 6000, Belgium

3. Department of Mathematics for the Decisions in Economics, Finance and Insurance, via del Castro Laurenziano, 9, Roma, 00161, Italy

Abstract

In this paper, we present a model to describe the evolution of the yield spread by considering the rating evaluation as the determinant of credit spreads. The underlying rating migration process is assumed to be a non-homogeneous discrete time semi-Markov process. We calculate the total sum of mean basis points paid within any given time interval. From this information we show how it is possible to extract the time evolution of expected interest rates and discount factors.

Publisher

World Scientific Pub Co Pte Lt

Subject

General Economics, Econometrics and Finance,Finance

Link

https://www.worldscientific.com/doi/pdf/10.1142/S0219024911006346

Reference27 articles.

1. Measuring Corporate Bond Mortality and Performance

2. An Introduction to Credit Risk Modeling

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