The valuation and Hedging of default-contingent claims in multiple currencies

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dc.contributor.author Truter, Gavin Kenneth
dc.date.accessioned 2012-09-18T05:10:23Z
dc.date.available 2012-09-18T05:10:23Z
dc.date.issued 2012-09-18
dc.identifier.uri http://hdl.handle.net/10539/11955
dc.description.abstract This dissertation examines the pricing of the same credit risk in two currencies, and hence the valuation of credit-contingent foreign exchange products. Such pricing hinges upon the dependence of the credit risk and the foreign exchange rate. We recall the reduced-form model proposed by Ehlers (2007), which allows credit-currency dependence through correlation between the Brownian motions driving the default intensity and the exchange rate, and through a jump in the exchange rate at the default time. Four basic specifications of this model are considered. Two of these specifications have not previously appeared in the literature and one of these, based on a lognormal process for the default intensity, proves to be especially useful and tractable. The problem of hedging defaultable claims in one currency with similar claims in another is briefly considered, and it is shown that hedging against the default event and against credit spread movements are not in general equivalent. en_ZA
dc.language.iso en en_ZA
dc.subject.lcsh Money.
dc.subject.lcsh Hedging (Finance)
dc.subject.lcsh Foreign exchange rates.
dc.subject.lcsh Brownian motions processes.
dc.title The valuation and Hedging of default-contingent claims in multiple currencies en_ZA
dc.type Thesis en_ZA


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