Packham, Natalie; Schloegl, Lutz; Schmidt, Wolfgang M. - In: Quantitative Finance 13 (2013) 12, pp. 1871-1889
The payoff of many credit derivatives depends on the level of credit spreads. In particular, credit derivatives with a leverage component are subject to gap risk, a risk associated with the occurrence of jumps in the underlying credit default swap spreads. In the framework of first passage time...