In this thesis, the structural model in credit risk and the credit derivatives is studied under both Black-Scholes setting and Variance Gamma (VG) setting. Using a Variance Gamma process, the distribution of the firm value process becomes asymmetric and leptokurtic. Also, the jump structure of VG processes
allows random default times of the reference entities. Among structural models, the most emphasis is made on the Black-Cox model by building a relation between the survival probabilities of the Black-Cox model and the value of a binary down and out barrier option. The survival probabilities under VG setting are
calculated via a Partial Integro Differential Equation (PIDE). Some applications of binary down and out barrier options, default probabilities and Credit Default Swap par spreads are also illustrated in this study.
| Identifer | oai:union.ndltd.org:METU/oai:etd.lib.metu.edu.tr:http://etd.lib.metu.edu.tr/upload/3/12609840/index.pdf |
| Date | 01 August 2008 |
| Creators | Anar, Hatice |
| Contributors | Ugur, Omur |
| Publisher | METU |
| Source Sets | Middle East Technical Univ. |
| Language | English |
| Detected Language | English |
| Type | M.S. Thesis |
| Format | text/pdf |
| Rights | To liberate the content for public access |
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