Reduced-form framework for multiple ordered default times under model uncertainty

Biagini Francesca, Ludwig Maximilians Universität München
Mazzon Andrea, University of Verona
Oberpriller Katharina, Ludwig Maximilians Universität München

In this paper we introduce a sublinear conditional operator with respect to a family of possibly nondominated probability measures in presence of multiple ordered default times. In this way we generalize the results of Biagini and Zhang, 2019, where a reduced-form framework under model uncertainty for a single default time is developed. Moreover, we use this operator for the valuation of credit portfolio derivatives under model uncertainty.

Area: CS55 - New probabilistic approaches in mathematical finance (Lorenzo Torricelli)

Keywords: Model uncertainty, sublinear conditional operator, reduced-form framework

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