A market with defaultable bonds where the bond dynamics is in a Heath-Jarrow-Morton setting and the forward rates are driven by an infinite number of Lévy factors is considered. The setting includes rating migrations driven by a Markov chain. All basic types of recovery are investigated. We formulate necessary and sufficient conditions (generalized HJM conditions) under which the market is arbitrage-free. Connections with consistency conditions are discussed.
@article{bwmeta1.element.bwnjournal-article-doi-10_4064-am37-3-2,
author = {Jacek Jakubowski and Mariusz Niew\k eg\l owski},
title = {Defaultable bonds with an infinite number of L\'evy factors},
journal = {Applicationes Mathematicae},
volume = {37},
year = {2010},
pages = {275-307},
zbl = {1230.91177},
language = {en},
url = {http://dml.mathdoc.fr/item/bwmeta1.element.bwnjournal-article-doi-10_4064-am37-3-2}
}
Jacek Jakubowski; Mariusz Niewęgłowski. Defaultable bonds with an infinite number of Lévy factors. Applicationes Mathematicae, Tome 37 (2010) pp. 275-307. http://gdmltest.u-ga.fr/item/bwmeta1.element.bwnjournal-article-doi-10_4064-am37-3-2/