Old Problems, Classical Methods, New Solutions

15 Mar 2020 Lipton Alexander

We use a powerful extension of the classical method of heat potentials, recently developed by the present author and his collaborators, to solve several significant problems of financial mathematics. We consider the following problems in detail: (A) calibrating the default boundary in the structural default framework to a constant default intensity; (B) calculating default probability for a representative bank in the mean-field framework; (C) finding the hitting time probability density of an Ornstein-Uhlenbeck process... (read more)

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