Modeling basket credit default swaps with default contagion
نویسندگان
چکیده
منابع مشابه
Modeling Basket Credit Default Swaps with Default Contagion
The specification of a realistic dependence structure is key to the pricing of multi-name credit derivatives. We value small k th-to-default CDS baskets in the presence of asset correlation and default contagion. Using a first-passage framework, firm values are modeled as correlated geometric Brownian motions with exponential default thresholds. Idiosyncratic links between companies are incorpo...
متن کاملContagion and Excess Correlation in Credit Default Swaps
This paper documents an increase in the correlation of credit default swap (CDS) spread changes during the credit crisis and investigates the source of that increase. One possible explanation is that correlations increased because fundamental values became more correlated during the crisis. Alternatively, correlations may have increased because of contagion, rather than because of an increase i...
متن کاملRecursive valuation of Basket Default Swaps
In this paper we consider an analytical valuation of Basket Default Swaps. Our solution is based on a continuous-time model in a conditional independence framework. We use the order statistics of the default times of the names in the basket to find a recursive algorithm for computation of the risk-neutral distribution of the default process of the basket. We derive an analytical expression for ...
متن کاملFast Pricing of Basket Default Swaps
A basket default swap is a derivative security tied to an underlying basket of corporate bonds or other assets subject to credit risk. The value of the contract depends on the joint distribution of the default times of the underlying assets. Valuing a basket default swap often entails Monte Carlo simulation of these default times. For baskets of high-quality credits and for swaps that require m...
متن کاملBasket Default Swaps, CDO’s and Factor Copulas
We consider a factor approach to the pricing of basket credit derivatives and synthetic CDO tranches. Our purpose is to deal in a convenient way with dependent defaults for a large number of names. We provide semi-explicit expressions of the stochastic intensities of default times and pricing formulae for basket default swaps and CDO tranches. Two cases are studied in detail: mean-variance mixt...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
ژورنال
عنوان ژورنال: The Journal of Credit Risk
سال: 2007
ISSN: 1744-6619
DOI: 10.21314/jcr.2007.055