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Mohd-Ramli, Siti

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  • Paper Title: Corporate Bond Pricing with Jump Diffusion Default Intensity
  • Department Affiliation: Applied Finance & Actuarial Studies
  • Supervisors’ Names:
    • Principal: Doctor Jiwook Jang
    • Associate: Doctor Sachi Purcal


To provide a bond pricing framework that allows for dependency between the interest rate and default intensity processes which are assumed to follow mean-reverting jump diffusion processes.

Key literature:

  1. Copula-dependent collateral default intensity and its application to CDS rate (Jang, 2007)
  2. Pricing the credit default swap rate for jump diffusion default intensity processes (Ma & Kim, 2010)


The time to default is modelled according to a Cox process whose intensity follows a mean reverting jump diffusion process. We also assume that a bond issuer’s default intensity is correlated to the short rate process where a copula function, a parametrically specified joint distribution generated from marginal distributions, is utilized to address the issue of correlated jumps to capture the dependence structure between two processes. The copula families considered are a Farlie-Gumbel-Mogenstern copula, a Gumbel copula and t-copula.

Research implications:

Corporate bond pricing model and its calibration   


Jump diffusion processes, a Cox process, dependency between the interest rate and default intensity, copulas, corporate bond pricing.