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DEFAULT RISK INSURANCE AND INCOMPLETE MARKETS1 |
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| Authors: | Philippe Artzner Freddy Delbaen |
| Abstract: | This paper uses the existence of secondary markets for debt instruments with default risk (e.g. corporate bonds) to define default insurance along the lines of financial economics. It examines whether, in the case of several risk-neutral measures, characteristics of default can be uniquely determined by the prices of contracts involving default-prone securities. |
| Keywords: | compensator credit risk default insurance dual predictable projection incomplete markets insurance premium intensity process optional projection reserve totally inaccessible stopping time |