International Journal of Computational Intelligence Systems

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Volume 9, Issue 2, April 2016, Pages 340 - 350

A New Default Intensity Model with Fuzziness and Hesitation

Authors
Liang Wunidewuliang@163.com
School of Economics and Management, Southeast University, Nanjing, 211189, Jiangsu, P R China
Department of mathematics, Henan Institute of Science and Technology, XinXiang, 453003, Henan, P R China
Ya-ming Zhuang
School of Economics and Management, Southeast University, Nanjing, 211189, Jiangsu, P R China
Wen Li
School of Economics and Management, Southeast University, Nanjing, 211189, Jiangsu, P R China
Received 17 September 2015, Accepted 25 January 2016, Available Online 1 April 2016.
DOI
10.1080/18756891.2016.1161345How to use a DOI?
Keywords
Intensity model; Fuzziness and Hesitation; Triangular intuitionistic fuzzy numbers; CDS pricing
Abstract

With the increased financial market volatility, corporate defaults will suffer from the double impact of the external shocks and internal contagion effects. In the existing stochastic default intensity models, the valuation of sensitivity parameters requires a lot of historical data, however, the limited market data does not guarantee the accuracy of parameter estimation, meanwhile, due to the people have a lot of fuzziness and hesitation judgements on the default process, it is necessary for us to let the corresponding random parameter of the default intensity to be a triangular intuitionistic fuzzy interval value. In this paper, we propose a new default intensity model based on the external shocks and internal contagion effects, and introduce the triangular intuitionistic fuzzy numbers into the credit default swaps (CDS) pricing modeling to describe the fuzziness and hesitation of the default process. In the end, we get a new fuzzy form pricing formula for CDS, and by the simulation analysis, we obtain that, all kinds of fuzziness and hesitation of the market have significant impact on credit spreads, and a model result with a consideration of the fair price of CDS in a fuzzy random environment including a pure random environment result. Compared with the existing stochastic model, these proper interval results can offer the investors more flexible options and can more reflect the impact of market environment on credit spreads.

Copyright
© 2016. the authors. Co-published by Atlantis Press and Taylor & Francis
Open Access
This is an open access article under the CC BY-NC license (http://creativecommons.org/licences/by-nc/4.0/).

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<Previous Article In Issue
Next Article In Issue>
Journal
International Journal of Computational Intelligence Systems
Volume-Issue
9 - 2
Pages
340 - 350
Publication Date
2016/04/01
ISSN (Online)
1875-6883
ISSN (Print)
1875-6891
DOI
10.1080/18756891.2016.1161345How to use a DOI?
Copyright
© 2016. the authors. Co-published by Atlantis Press and Taylor & Francis
Open Access
This is an open access article under the CC BY-NC license (http://creativecommons.org/licences/by-nc/4.0/).

Cite this article

risenwbib
TY  - JOUR
AU  - Liang Wu
AU  - Ya-ming Zhuang
AU  - Wen Li
PY  - 2016
DA  - 2016/04/01
TI  - A New Default Intensity Model with Fuzziness and Hesitation
JO  - International Journal of Computational Intelligence Systems
SP  - 340
EP  - 350
VL  - 9
IS  - 2
SN  - 1875-6883
UR  - https://doi.org/10.1080/18756891.2016.1161345
DO  - 10.1080/18756891.2016.1161345
ID  - Wu2016
ER  -