Jumps as components in the pricing of credit and equity products

The equity and credit markets have become increasingly integrated over recent years. This has increased the need for models and tools that allow traders to hedge their risk simultaneously in the two markets. Here, Daniel Bloch presents an approach that combinesthe information set of the two markets by incorporating a jump component in a stock diffusion process. The main advantage of the approach compared with other methods is itsability to maintain closed-form solutions while pricing vanilla products in the two markets

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