Valuation of credit default swaps and swaptions

Time - inhomogeneous Lévy processes in interest rate and credit risk models

In this thesis, we present interest rate models and a credit risk model, all driven by time-inhomogeneous Lévy processes, i.e. stochastic processes whose increments are independent but in general not stationary. In the interest rate part, we discuss a Heath–Jarrow–Morton forward rate model (the Lévy term structure model), a model for forward bond prices (the Lévy forward price model) and a Libo...

Valuation of Credit Default Swaptions and Credit Default Index Swaptions

Quantitative Finance Research Centre

We present the multi-factor quadratic reduced form model for pricing of credit risky securities. We use quadratic Gaussian processes to model the short term interest rate and the intensity of default showing that we get tractable formulas for the price of credit default swaps and credit default swaptions.

Valuation of Credit Default Swap and Swaptions

This paper presents a conceptual framework for valuation of single-name credit derivatives, and recuperates, in some cases generalizing, a few of known results in credit risk theory. Valuation is viewed with respect to a given state price and relative to a general numeraire. Survival probabilities and default recoveries are considered as processes adapted to a subfiltration, following Jeanblanc...

A Note on Survival Measures and the Pricing of Options on Credit Default Swaps

In this note the pricing of options on credit default swaps using the survival-measure-pricing technique is discussed. In particular, we derive a modification of the famous Black (1976) futures pricing formula which applies to options on CDS, and show how other pricing formulae can be easily derived if the dynamics of the forward CDS rates are specified differently. The main tool in the derivat...