Packham, Natalie; Schlögl, Lutz; Schmidt, Wolfgang M. - Frankfurt School of Finance and Management - 2009
The payoff of many credit derivatives depends on the level of credit spreads. In particular, the payoff of credit … derivatives with a leverage component is sensitive to jumps in the underlying credit spreads. In the framework of first passage … default probabilities and credit spreads. An example for a volatility process is the square root of a Lévy-driven Ornstein …