Particle System and Stochastic PDE in Credit Portfolio Modelling (Theoretical Part)

In this talk, we try to construct a dynamical model for the basket credit products in the credit market under the structural-model framework. We use the particle representation for the firms' asset value and investigate the evolution of the empirical measure of the particle system. By proving the convergence of the empirical measure we can achieve a stochastic PDE which is satisfied by the density of the limit empirical measure and also give an explicit formula for the default proportion at any time t. Furthermore, the dynamics of the underlying firms' asset values can be assumed to be either driven by Brownian motions or more general Levy processes, or even have some interactive effects among the particles. This is a joint work with Dr. Ben Hambly.