Dynamic credit spread model

Details Dynamic credit spread model Dynamic credit spread model

2011-01-18

2011-01-18

Kazimi, Hani (Department: 3695)

Data processing: financial, business practice, management, or co

Automated electrical financial or business practice or...

Finance

Reexamination Certificate

active

07873575

ABSTRACT:
Systems and methods for calculating a value of a credit hybrid. The value of the credit hybrid is determined based on a model of the forward hazard rate that is based on a stochastic differential equation that includes a jump term for the hazard rate. The jump term may be based on a non-negative function of the hazard rate and a Poisson process. In addition, the stochastic differential equation may include a drift term for the hazard rate and a Brownian motion term for the hazard rate. The value of the credit hybrid may be determined by calibrating the model using calibration data and then calculating the value of the credit hybrid using the calibrated model. Both the calibration and the valuation steps may utilize Monte Carlo simulations.

REFERENCES:
patent: 7599871 (2009-10-01), Borland
patent: 2004/0128221 (2004-07-01), Pandher
patent: 2005/0044029 (2005-02-01), Griffin et al.
patent: 2006/0190377 (2006-08-01), Stanley et al.
Hybrid Equity-Credit Modeling. Atlan et al., Equities & Derivatives Quantitative R&D, BNP Paribas, Jul. 25, 2005.
Hull, “Chap. 21: Credit Derivatives,” Options, Futures, and Other Derivatives, 6th ed., Prentice Hall, 2006, pp. 507-524.

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