Researchers from University of Minnesota Report Recent Findings in Insurance Economics (Pricing credit default swaps with a random recovery rate by a…

Researchers from University of Minnesota Report Recent Findings in Insurance Economics (Pricing credit default swaps with a random recovery rate by a double inverse Fourier transform)

By a News Reporter-Staff News Editor at Insurance Weekly News -- Investigators publish new report on Insurance Economics. According to news originating from Duluth, Minnesota, by VerticalNews correspondents, research stated, "We evaluate the par spread for a single-name credit default swap with a random recovery rate. It is carried out under the framework of a structural default model in which the asset-value process is of infinite activity but finite variation."

Our news journalists obtained a quote from the research from the University of Minnesota, "The recovery rate is assumed to depend on the undershoot of the asset value below the default threshold when default occurs. The key part is to evaluate a generalized expected discounted penalty function, which is a special case of the so-called Gerber-Shiu function in actuarial ruin theory. We first obtain its double Laplace transform in time and in spatial variable, and then implement a numerical Fourier inversion integration."

According to the news editors, the research concluded: "Numerical experiments show that our algorithm gives accurate results within reasonable time and different shapes of spread curve can be obtained."

For more information on this research see: Pricing credit default swaps with a random recovery rate by a double inverse Fourier transform. Insurance Mathematics & Economics, 2015;65():103-110. Insurance Mathematics & Economics can be contacted at: Elsevier Science Bv, PO Box 211, 1000 Ae Amsterdam, Netherlands.

The news correspondents report that additional information may be obtained from X.M. Hao, University of Minnesota, Dept. of Math & Stat, Duluth, MN 55812, United States.

Keywords for this news article include: Duluth, Minnesota, United States, Insurance Economics, North and Central America

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