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Title: Local Risk-Minimization for Defaultable Claims with Recovery Process

Abstract

We study the local risk-minimization approach for defaultable claims with random recovery at default time, seen as payment streams on the random interval [0,{tau} Logical-And T], where T denotes the fixed time-horizon. We find the pseudo-locally risk-minimizing strategy in the case when the agent information takes into account the possibility of a default event (local risk-minimization with G-strategies) and we provide an application in the case of a corporate bond. We also discuss the problem of finding a pseudo-locally risk-minimizing strategy if we suppose the agent obtains her information only by observing the non-defaultable assets.

Authors:
 [1];  [2]
  1. LMU, Department of Mathematics (Germany)
  2. Universita degli Studi di Perugia, Dipartimento di Matematica e Informatica (Italy)
Publication Date:
OSTI Identifier:
22043764
Resource Type:
Journal Article
Resource Relation:
Journal Name: Applied Mathematics and Optimization; Journal Volume: 65; Journal Issue: 3; Other Information: Copyright (c) 2012 Springer Science+Business Media, LLC; Country of input: International Atomic Energy Agency (IAEA)
Country of Publication:
United States
Language:
English
Subject:
97 MATHEMATICAL METHODS AND COMPUTING; BUSINESS; FINANCING; HAZARDS; MATHEMATICAL MODELS; MATHEMATICAL SOLUTIONS; MATHEMATICS; MINIMIZATION; RANDOMNESS; STREAMS

Citation Formats

Biagini, Francesca, E-mail: biagini@mathematik.uni-muenchen.de, and Cretarola, Alessandra, E-mail: alessandra.cretarola@dmi.unipg.it. Local Risk-Minimization for Defaultable Claims with Recovery Process. United States: N. p., 2012. Web. doi:10.1007/S00245-011-9155-8.
Biagini, Francesca, E-mail: biagini@mathematik.uni-muenchen.de, & Cretarola, Alessandra, E-mail: alessandra.cretarola@dmi.unipg.it. Local Risk-Minimization for Defaultable Claims with Recovery Process. United States. doi:10.1007/S00245-011-9155-8.
Biagini, Francesca, E-mail: biagini@mathematik.uni-muenchen.de, and Cretarola, Alessandra, E-mail: alessandra.cretarola@dmi.unipg.it. Fri . "Local Risk-Minimization for Defaultable Claims with Recovery Process". United States. doi:10.1007/S00245-011-9155-8.
@article{osti_22043764,
title = {Local Risk-Minimization for Defaultable Claims with Recovery Process},
author = {Biagini, Francesca, E-mail: biagini@mathematik.uni-muenchen.de and Cretarola, Alessandra, E-mail: alessandra.cretarola@dmi.unipg.it},
abstractNote = {We study the local risk-minimization approach for defaultable claims with random recovery at default time, seen as payment streams on the random interval [0,{tau} Logical-And T], where T denotes the fixed time-horizon. We find the pseudo-locally risk-minimizing strategy in the case when the agent information takes into account the possibility of a default event (local risk-minimization with G-strategies) and we provide an application in the case of a corporate bond. We also discuss the problem of finding a pseudo-locally risk-minimizing strategy if we suppose the agent obtains her information only by observing the non-defaultable assets.},
doi = {10.1007/S00245-011-9155-8},
journal = {Applied Mathematics and Optimization},
number = 3,
volume = 65,
place = {United States},
year = {Fri Jun 15 00:00:00 EDT 2012},
month = {Fri Jun 15 00:00:00 EDT 2012}
}
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