A Markovian Model of Default Interactions: Comments and Extensions

Vladyslav Putyatin, David Prieul & Svetlana Maslova review the main conclusions of the Davis & Lo Enhanced Risk Model and obtain a closedform solution that should be valuable in practice

9 April 2019 Editor Articles Comments Off on A Markovian Model of Default Interactions: Comments and Extensions

This article analyses Davis and Lo (2001b) enhanced risk model, which is a dynamic version of the popular market model of infectious defaults of Davis and Lo (2001a). For all details regarding the enhanced risk model we refer the reader to the original article of Davis and Lo (2001b). In this article we review the main conclusions of the model and obtain a closed-form solution that should be valuable in practice.

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A Markovian Model of Default Interactions: Comments and Extensions

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