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research.html
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<!DOCTYPE html>
<html>
<head>
<meta charset="utf-8">
<meta http-equiv="X-UA-Compatible" content="IE=edge">
<title>GETTING STARTED WITH BRACKETS</title>
<meta name="description" content="An interactive getting started guide for Brackets.">
<link rel="stylesheet" href="main.css">
</head>
<body>
<h1>Research Projects</h1>
<h2>Brief Introduction of My research</h2>
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<p>
My research topic is about proposing a credit risk model for correlated defaults. More specificlly, we aim to derive an analytical price formula of a basket CDS(credit default swap). Portfolio credit derivatives are important for managing default risk. My work is based on the new hybrid model which was proposed by my major professor Dr.Kercheval and his former student Pierre Gaurru.
</p>
<p>
The motivation of this new model is to resolve the computation difficulty in credit derivative when the number of underlying assets becomes large. Apart from its tractability, from model perspective, the value of this model is that it also gives out the economic explanantion of the hazard rate which is usually set to be an exogeneous fucntion in traditional reduced form model. For more information, you could refer to the paper here.
</p>
<p>
My work is focused on generalizing the result to N(N>=3) dimensional case. I also extend the results to include the stochastic interest rates and incorpate external market factors such as stochastic interest rate like a factor model did.
</p>
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<h3>Quick View of Our Model</h3>
<p>
<a href="ChenchenPoster2016.pdf" title="Quick look at our model"> Poster</a>
</p>
<h2>Projects associated with My Research</h2>
<h3>My Candidancy Exam Project</h3>
<p>
I discuss two kinds of structural models. One is based on paper. This structural
model, in which the time of default is given by the first passage time of the stochastic process below a predetermined barrier. The second model used is the center of my research as described above, specices the default time to be the time of the first jump of log-return of a firm's stock price. Under both of them, the underlying asset is described by an exponential variance gamma process.
</p>
<p>
Under first model, two numerical methods are considered. Both of them are trying to transform the problem to computing a binary down-and-in barrier options. First is the Monte Carlo method. The second numerical method is trying to solve a PIDE (partial integral differential equation) by finite difference method.
</p>
<p>
This project can be viewed as the motivation of new hybrid model. More details are <a href="mythesis.pdf" title="Quick look at our model"> here</a>!
</p>
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