, a credit quality process is driven by an Itô integral with respect to a Brownian motion with stochastic volatility … default probabilities and credit spreads. An example for a volatility process is the square root of a Lévy-driven Ornstein …-Uhlenbeck process. We show that jumps in the volatility translate into jumps in credit spreads. We examine the dynamics of the OS …

stochastic volatility, jumps in the underlying and the price process and a stochastic target level as well as with deterministic …