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Risks 2018, 6(2), 58; https://doi.org/10.3390/risks6020058

A Credit-Risk Valuation under the Variance-Gamma Asset Return

Laboratory of Control under Incomplete Information, Trapeznikov Institute of Control Sciences of RAS, Profsoyuznaya 65, 117997 Moscow, Russia
Received: 19 April 2018 / Revised: 11 May 2018 / Accepted: 16 May 2018 / Published: 17 May 2018
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Abstract

This paper considers risks of the investment portfolio, which consist of distributed mortgages and sold European call options. It is assumed that the stream of the credit payments could fall by a jump. The time of the jump is modeled by the exponential distribution. We suggest that the returns on stock are variance-gamma distributed. The value at risk, the expected shortfall and the entropic risk measure for this portfolio are calculated in closed forms. The obtained formulas exploit the values of generalized hypergeometric functions. View Full-Text
Keywords: variance-gamma distribution; credit risk; call option; exponential distribution; shortfall risk; generalized hyperbolic function variance-gamma distribution; credit risk; call option; exponential distribution; shortfall risk; generalized hyperbolic function
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).
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Ivanov, R.V. A Credit-Risk Valuation under the Variance-Gamma Asset Return. Risks 2018, 6, 58.

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