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Structural credit risk model driven by Lévy process under knight uncertainty

As per the projections of conventional credit risk structured model, the risky asset values tend to adhere to the geometric Brownian motion. On the contrary, the risky asset values remain a non-continuous and dynamic ones and jump based on the conditions. Is not possible to measure the real Knight U...

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Detalles Bibliográficos
Autores principales: Tang, Zhenyu, Zhong, Bin, Zhou, Liang, Shen, Chuanhe
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Springer US 2023
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10154764/
https://www.ncbi.nlm.nih.gov/pubmed/37361063
http://dx.doi.org/10.1007/s10479-023-05309-2
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author Tang, Zhenyu
Zhong, Bin
Zhou, Liang
Shen, Chuanhe
author_facet Tang, Zhenyu
Zhong, Bin
Zhou, Liang
Shen, Chuanhe
author_sort Tang, Zhenyu
collection PubMed
description As per the projections of conventional credit risk structured model, the risky asset values tend to adhere to the geometric Brownian motion. On the contrary, the risky asset values remain a non-continuous and dynamic ones and jump based on the conditions. Is not possible to measure the real Knight Uncertainty risks in financial markets with the help of a single probability measure. In this background, the current research work analyzes a structural credit risk model that belongs to Levy market under Knight Uncertainty. With the help of Lévy-Laplace exponent, the authors developed a dynamic pricing model in this study and acquired the price intervals for default probability, stock value and the bond value of enterprise. To be specific, the study intended to establish explicit solutions for three value processes, discussed earlier, with an assumption that the jump process follows a log-normal distribution. At the end, the study also conducted numerical analysis to understand the crucial role played by Knight Uncertainty upon the pricing of default probability and the stock value of the enterprise.
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spelling pubmed-101547642023-05-09 Structural credit risk model driven by Lévy process under knight uncertainty Tang, Zhenyu Zhong, Bin Zhou, Liang Shen, Chuanhe Ann Oper Res Original Research As per the projections of conventional credit risk structured model, the risky asset values tend to adhere to the geometric Brownian motion. On the contrary, the risky asset values remain a non-continuous and dynamic ones and jump based on the conditions. Is not possible to measure the real Knight Uncertainty risks in financial markets with the help of a single probability measure. In this background, the current research work analyzes a structural credit risk model that belongs to Levy market under Knight Uncertainty. With the help of Lévy-Laplace exponent, the authors developed a dynamic pricing model in this study and acquired the price intervals for default probability, stock value and the bond value of enterprise. To be specific, the study intended to establish explicit solutions for three value processes, discussed earlier, with an assumption that the jump process follows a log-normal distribution. At the end, the study also conducted numerical analysis to understand the crucial role played by Knight Uncertainty upon the pricing of default probability and the stock value of the enterprise. Springer US 2023-05-03 /pmc/articles/PMC10154764/ /pubmed/37361063 http://dx.doi.org/10.1007/s10479-023-05309-2 Text en © The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2023, Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law. This article is made available via the PMC Open Access Subset for unrestricted research re-use and secondary analysis in any form or by any means with acknowledgement of the original source. These permissions are granted for the duration of the World Health Organization (WHO) declaration of COVID-19 as a global pandemic.
spellingShingle Original Research
Tang, Zhenyu
Zhong, Bin
Zhou, Liang
Shen, Chuanhe
Structural credit risk model driven by Lévy process under knight uncertainty
title Structural credit risk model driven by Lévy process under knight uncertainty
title_full Structural credit risk model driven by Lévy process under knight uncertainty
title_fullStr Structural credit risk model driven by Lévy process under knight uncertainty
title_full_unstemmed Structural credit risk model driven by Lévy process under knight uncertainty
title_short Structural credit risk model driven by Lévy process under knight uncertainty
title_sort structural credit risk model driven by lévy process under knight uncertainty
topic Original Research
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10154764/
https://www.ncbi.nlm.nih.gov/pubmed/37361063
http://dx.doi.org/10.1007/s10479-023-05309-2
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