In this paper we present a tree model for defaultable bond prices which can be used for the pricing of credit derivatives. The model is based upon the two-factor Hull-White (1994) model for default-free interest rates, where one of the factors is taken to be the credit spread of the defaultable...

In this paper a new credit risk model for credit derivatives is presented. The model is based upon the Libor market modelling framework for default-free interest rates. We model effective default-free forward rates and effective forward credit spreads as lognormal diffusion processes, and...

This paper gives a simple introduction to portfolio credit risk models of the factor model type. In factor models, the dependence between the individual defaults is driven by a small number of systematic factors. When conditioning on the realisation of these factors the defaults become...