Workgroup Financial Mathematics

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Credit risk modelling

Dr. Yinglin Zhang

Schedule and Venue



Tue 16-18

First seminar: Tuesday 26th of October

Room: TBA

Pre-registration is mandatory via email to including your name, student ID, study field and Studienordnung. Further information will be announced by email.

Seminar Description

Credit risk is one of the fundamental factors of financial risk. This seminar gives an introduction to the so called "reduced-form" or "intensity based" approach of credit risk modeling in continuous time, after an introduction of semimartingales and related properties. In particular, times of defaults are modeled by unpredictable stopping times and their relation with a default intensity or hazard rate process is established. Based on this framework, the valuation and hedging problem of defaultable claims is discussed.


Philip E. Protter, Stochastic Integration and Differential Equations (Springer, 2005). Chapters:
  • II. Semimartingales and Stochastic Integrals (short introduction)
  • III. Semimartingales and Decomposable Processes (short introduction)
  • IV. General Stochastic Integration and Local Times (short introduction)
Bielecki & Rutkowski, Credit Risk: Modeling, Valuation and Hedging (Springer, 2004). Chapters:
  • 1. Introduction to Credit Risk (optional, only for background)
  • 4. Hazard Function of a Random Time
  • 5. Hazard Process of a Random Time
  • 6. Martingale Hazard Process
  • 8. Intensity-Based Valuation of Defaultable Claims

For whom is this course?

Target Participants: Students of the Master in Mathematics or in Financial and Insurance Mathematics.

Pre-requisites: Probability Theory, Financial Mathematics I+II

Applicable credits: 3 ECTS