A contagion model with Markov regime-switching intensities  

作　　者：Yinghui DONG Guojing WANG 

机构地区：[1]Financial Engineering Research Center, Shanghai Jiao Tong University, Shanghai 200052,China [2]Department of Mathematics and Physics, Suzhou University of Science and Technology,Suzhou 215011, China [3]Department of Mathematics and Center for Financial Engineering, Soochow University,Suzhou 215006, China

出　　处：《Frontiers of Mathematics in China》2014年第1期45-62,共18页中国高等学校学术文摘·数学（英文）

基　　金：Acknowledgements The authors thank the anonymous referees for valuable comments to improve the earlier version of the paper. The research of Yinghui Dong was supported by the Natural Science Foundation of Jiangsu Province （Grant No. BK20130260）, the National Natural Science Foundation of China （Grant No. 11301369）, and the China Postdoctoral Science Foundation （Grant No. 2013M540371）. The research of Guojing Wang was supported by the National Natural Science Foundation of China （Grant No. 11371274） and the Natural Science Foundation of Jiangsu Province （Grant No. BK2012613）.

摘　　要：We consider a two-dimensional reduced form contagion model with regime-switching interacting default intensities. The model assumes the intensities of the default times are driven by macro-economy described by a homogeneous Markov chain as well as the other default. By using the idea of ＇change of measure＇ and some closed-form formulas for the Laplace transforms of the integrated intensity processes, we derive the two-dimensional conditional and unconditional joint distributions of the default times. Based on these results, we give the explicit formulas for the fair spreads of the first-to-default and second-to-default credit default swaps （CDSs） on two underlyings.We consider a two-dimensional reduced form contagion model with regime-switching interacting default intensities. The model assumes the intensities of the default times are driven by macro-economy described by a homogeneous Markov chain as well as the other default. By using the idea of ＇change of measure＇ and some closed-form formulas for the Laplace transforms of the integrated intensity processes, we derive the two-dimensional conditional and unconditional joint distributions of the default times. Based on these results, we give the explicit formulas for the fair spreads of the first-to-default and second-to-default credit default swaps （CDSs） on two underlyings.

关 键 词：Credit default swap （CDS） contagion model REGIME-SWITCHING change of measure 

分 类 号：O211.62[理学—概率论与数理统计] TB383[理学—数学]