Doubly Stochastic Reduced Form Credit Risk Model and Default Probability Uncertainty – a Technical Toolkit

摘要

Reduced form credit risk models provide a versatile platform tomodel credit risks and to quantify the interplay between the stochasticdimension of default probabilities and credit spread levels. Thisarticle gives a brief introduction to the required technical foundationsand discusses the approach to examine uncertainties regarding defaultprobabilities and credit spreads which has been established by [1]. Theintention of this article is to help academic researcher as well as practitionersto understand related research projects, to do new research onthis question or to improve credit risk models used in financial institutions.