Partial Information and Default Hazard Process

2003 ◽  
Author(s):  
Monique Jeanblanc ◽  
Stoyan Valchev
Keyword(s):  
Partial Information ◽  
Hazard Process

PARTIAL INFORMATION AND HAZARD PROCESS

2005 ◽  
Vol 08 (06) ◽  
pp. 807-838 ◽  
Author(s):  
MONIQUE JEANBLANC ◽  
STOYAN VALCHEV
Keyword(s):  
Partial Information ◽  
Credit Spreads ◽  
Reduced Form ◽  
High Yield ◽  
Bond Prices ◽  
Default Time ◽  
Term Structures ◽  
Asset Value ◽  
Information Sets ◽  
Hazard Process

This paper studies in some examples the role of information in a default-risk framework. We examine three types of information for a firm's unlevered asset value to the secondary bond market: the classical case of continuous and perfect information, observation of past and contemporaneous asset values at selected discrete times, and observation of contemporaneous asset value at discrete times. The third information filtration is contained in the second, which in turn, is contained in the first. We investigate the changes of the distributional properties of the default time and the properties of bond prices and credit spreads with the reductions of the information sets. Consistently with the observed market prices, model bond prices with partial information have surprise jumps prior to default. Credit spreads for very short times to maturities are increasing with the reductions of the information sets. High-yield bonds with the two types of incomplete information have downward sloping term structures of credit spreads. For firms with good credit qualities, increases of the observation lags lead to upward shifts in the term structures of credit spreads. The two information constrained models admit reduced form representations, in which the time of default is a totally inaccessible time with default arrival intensities, but it is better avoiding the intensity approach to valuation since the hazard process approach is more efficient.

Evidence for using partial information to reconstruct dates of events

1991 ◽  
Author(s):  
Charles P. Thompson ◽  
John J. Skowronski ◽  
Andrew L. Betz
Keyword(s):  
Partial Information

Modeling Heterogeneity in Trip-Distributions with Partial Information

2007 ◽  
Author(s):  
Kurt Jornsten ◽  
Gisle Kleppe ◽  
Inge Thorsen ◽  
Jan Uboe
Keyword(s):  
Partial Information
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