Pricing Derivatives on Financial Securities Subject to Credit Risk
作者:
ROBERT A. JARROW,
STUART M. TURNBULL,
期刊:
The Journal of Finance
(WILEY Available online 1995)
卷期:
Volume 50,
issue 1
页码: 53-85
ISSN:0022-1082
年代: 1995
DOI:10.1111/j.1540-6261.1995.tb05167.x
出版商: Blackwell Publishing Ltd
数据来源: WILEY
摘要:
ABSTRACTThis article provides a new methodology for pricing and hedging derivative securities involving credit risk. Two types of credit risks are considered. The first is where the asset underlying the derivative security may default. The second is where the writer of the derivative security may default. We apply the foreign currency analogy of Jarrow and Turnbull (1991) to decompose the dollar payoff from a risky security into a certain payoff and a “spot exchange rate.” Arbitrage‐free valuation techniques are then employed. This methodology can be applied to corporate debt and over the counter derivatives, such as swaps and
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