Valuation of Credit Default Swap and Swaptions

Valuation of Credit Default Swaptions and Credit Default Index Swaptions

Credit Default Swap Valuation with Counterparty Risk ∗

Using the reduced form framework with inter-dependent default correlation, we perform valuation of credit default swap with counterparty risk. The inter-dependent default risk structure between the protection buyer, protection seller and the reference entity in a credit default swap are characterized by their correlated default intensities, where the default intensity of one party increases whe...

Valuation of a Default Swap Option___________.PDF

This paper makes an analysis on a default swap option that an investment bank in Japan produced on the credit-risk of a convertible bond issued by a third company C. In this default swap option, a protection buyer A against a default of C owns the right of starting an interest swap between the buyer and a protection seller B when a credit event happens. When B starts the swap after a default, t...

Anchoring Credit Default Swap Spreads to Firm Fundamentals∗

This paper examines the capability of firm fundamentals in explaining the cross-sectional variation of credit default swap spreads. We start with the Merton (1974) model, which combines two major credit risk determinants into a distance-to-default measure. We convert the distance-to-default measure into a raw CDS valuation based on a constant hazard rate assumption and then map the raw CDS valu...

Comparing Prediction Power of Artificial Neural Networks Compound Models in Predicting Credit Default Swap Prices through Black–Scholes–Merton Model

Default risk is one of the most important types of risks, and credit default swap (CDS) is one of the most effective financial instruments to cover such risks. The lack of these instruments may reduce investment attraction, particularly for international investors, and impose potential losses on the economy of the countries lacking such financial instruments, among them, Iran. After the 2007 fi...