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Default Intensities implied by CDO Spreads : Inversion Formula and Model Calibration
Cont, Rama - 2012
We propose a simple computational method for constructing an arbitrage-free CDO pricing model which matches a pre-specified set of CDO tranche spreads. The key ingredient of the method is a formula for computing the local default intensity function of a portfolio from its expected tranche...
Persistent link: https://www.econbiz.de/10013116869
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A Joint Analysis of the Term Structure of Credit Default Swap Spreads and the Implied Volatility Surface
Da Fonseca, José; Gottschalk, Katrin - 2023
This paper presents a joint analysis of the term structure of credit default swap (CDS) spreads and the implied … volatility surface. The rapid development of the CDS market has provided convenient products to extract credit risk, and its … volatility. Only very few studies analyze the entire smile and the term structure of CDS spreads.The purpose of this paper is to …
Persistent link: https://www.econbiz.de/10014254192
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Pricing a Credit-Linked Note on a CDX Tranche
Chertok, Daniel L. - 2012
a matching CDS on this tranche …
Persistent link: https://www.econbiz.de/10013098210
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CDS Option Valuation under Double-Exponential Jump-Diffusion (DEJD)
Bhar, Ramaprasad - 2013
This study combines the empirical estimation of a Double-Exponential Jump-Diffusion (DEJD) process for a CDS index and … the market. The large and persistent differences suggest the presence of risk premiums relating to large upward CDS jumps … of CDS returns, and can be used to check pricing in illiquid markets …
Persistent link: https://www.econbiz.de/10013088281
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CDO Tranche Analytic Pricing with Subordinator Levy Marshall-Olkin Correlation
Giovannitti, Stefano - 2016
In this paper we present two (semi)-analytic synthetic CDO tranche pricing formulas using a subordinator Levy Marshall-Olkin credit correlation model. These formulas can be easily evaluated in terms of machine computational time, therefore they are particularly suitable for the correlation model...
Persistent link: https://www.econbiz.de/10013001808
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Firm-Specific Risk-Neutral Distributions with Options and CDS
Aramonte, Sirio - 2019
credit default swaps (CDS). Options and CDS provide information about the central part and the left tail of the distribution …, respectively. Together but not in isolation, options and CDS span the intermediate part of the distribution, which is driven by …
Persistent link: https://www.econbiz.de/10012902368
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Do Rare Events Explain CDX Tranche Spreads?
Seo, Sang Byung - 2020
We investigate whether a model with time-varying probability of economic disaster can explain prices of collateralized debt obligations. We focus on senior tranches of the CDX, an index of credit default swaps on investment grade firms. These assets do not incur losses until a large fraction of...
Persistent link: https://www.econbiz.de/10012855138
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The Information Content of Cross-Market Deviations in Option Prices and Credit Default Swap Spreads
Angelopoulos, Georgios - 2020
Cross-market deviations in equity put option prices and credit default swap spreads are temporal and revert to their usual level shortly after they occur, on average within about one week. The process of reversion involves predictable and economically significant changes also in the equity...
Persistent link: https://www.econbiz.de/10012857332
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Synthetic Options and Implied Volatility for the Corporate Bond Market
Chen, Steven Shu-Hsiu; Doshi, Hitesh; Seo, Sang Byung - 2021
We synthetically create option contracts on a corporate bond index using CDX swaptions, overcoming the limitations that stem from the lack of traded corporate bond options. Our approach allows us to estimate forward-looking moments concerning the corporate bond market in a model-free manner. By...
Persistent link: https://www.econbiz.de/10013322828
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The term structure of the price of variance risk
Andries, Marianne; Eisenbach, Thomas M.; Schmalz, Martin C. - 2015
We estimate the term structure of the price of variance risk (PVR), which helps distinguish between competing asset-pricing theories. First, we measure the PVR as proportional to the Sharpe ratio of short-term holding returns of delta-neutral index straddles; second, we estimate the PVR in a...
Persistent link: https://www.econbiz.de/10011303715