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In the first part we consider a dynamical model for the number of defaults of a pool of names. The model is based on the notion of generalized Poisson process, allowing for more than one default in small time intervals, contrary to many alternative approaches to loss modeling. We illustrate how...
Persistent link: https://www.econbiz.de/10014058476
We review different theoretical and empirical approaches for measuring the impact of liquidity on CDS prices. We start by reduced form models incorporating liquidity as an additional discount rate. We review Chen, Fabozzi and Sverdlove (2008) and Buhler and Trapp (2006, 2008), adopting different...
Persistent link: https://www.econbiz.de/10013133848
Credit Default Swaps (CDS) on a reference entity may be traded in multiple currencies, in that protection upon default may be offered either in the domestic currency where the entity resides, or in a more liquid and global foreign currency. In this situation currency fluctuations clearly...
Persistent link: https://www.econbiz.de/10012936666
Following the recent introduction of new forms of Credit Default Swap (CDS) contracts expressed as upfront payments plus a fixed coupon, this note examines the methodology suggested by Barclays Capital, Goldman Sachs, JPMorgan, Markit (BGJM)/ISDA (2009), for conversion of CDS quotes between...
Persistent link: https://www.econbiz.de/10014209246
We consider counterparty risk for interest rate payoffs in presence of correlation between the default event and interest rates. The previous analysis of Brigo and Masetti (2006), assuming independence, is further extended to interest rate payoffs different from simple swap portfolios. A...
Persistent link: https://www.econbiz.de/10014056259
We develop and test a fast and accurate semi-analytical formula for single-name default swaptions in the context of the shifted square root jump diffusion (SSRJD) default intensity model. The formula consists of a decomposition of an option on a summation of survival probabilities in a summation...
Persistent link: https://www.econbiz.de/10008542369
We present a stochastic default intensity model where the intensity follows a tractable jump-diffusion process obtained by applying a deterministic change of time to a non mean-reverting square root jump-diffusion process. The model generates higher implied volatilities for default swaptions...
Persistent link: https://www.econbiz.de/10008542370
credit derivatives market data. A few variants of the model are calibrated in turn to market data, and different calibration …
Persistent link: https://www.econbiz.de/10005558331
With the rapid development of the credit derivatives market, efficient pricing of default has become an extremely …
Persistent link: https://www.econbiz.de/10008490650
Persistent link: https://www.econbiz.de/10002497060