In this paper, the treasury rates and the credit migrations are jointly modeled by multi-dimensional affine processes. In order to capture the entire information, including credit migrations and default events, we construct non-conservative regular affine processes to model credit migrations and...

We develop a general and efficient method for valuating credit derivatives based on multiple entities in an affine framework. This includes interdependence of market and credit risk, joint credit migration and counterparty default risk of multiple firms. As an application we provide closed form...

We propose and examine a simple model for credit migration and spread curves of a single firm both under the real-world and the risk-neutral measure. This model is a hybrid of a structural and a reduced-form model. Default is triggered either by successive downgradings of the firm or an...

In this paper, we develop a generalized affine model to characterize correlated credit risk of multi-firms. When valuing credit derivatives, this new approach allows to incorporate correlative market and credit risk, interdependent default risk structure and counterparty risk into consideration....