Pricing Credit Default Swap with Contagious Risk and Simulation

This paper mainly studies the pricing of credit default swap （CDS） with the loan as the reference asset, and gives a model based on the obtained conclusions. In the contract of CDS, we consider that the default of the protection＇s seller is correlated with the stochastic interest rate following Vasi...

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Published inShanghai jiao tong da xue xue bao Vol. 21; no. 1; pp. 57 - 62
Main Author 郝瑞丽 张金清 刘永辉 胡周红
Format Journal Article
LanguageEnglish
Published Shanghai Shanghai Jiaotong University Press 01.02.2016
Subjects
Architecture
Computer Science
Computer simulation
Contracts
Correlation
Electrical Engineering
Engineering
Life Sciences
Loans
Materials Science
Mathematical models
Pricing
Risk
Stochasticity
Vasicek interest rate
contagious risk
credit default swap (CDS)
O175.2
Online AccessGet full text
ISSN1007-1172
1995-8188
DOI10.1007/s12204-016-1699-y

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Summary:This paper mainly studies the pricing of credit default swap （CDS） with the loan as the reference asset, and gives a model based on the obtained conclusions. In the contract of CDS, we consider that the default of the protection＇s seller is correlated with the stochastic interest rate following Vasicek model and the default state of the reference firm. We give the pricing formula of CDS and analyze the effect of the contagious risk between the counterDarties on the Dricing of CDS.
Bibliography:HAO Ruili, ZHANG Jinqing, LIU Yonghui, HU Zhouhong（1. Post-Doctoral Station of Applied Economics, School of Economics, Fudan University, Shanghai 200433, China; 2 School of Statistics and Mathematics, Shanghai Finance University, Shanghai 201209, China; 3. School of Business Information Management, Shanghai University of International Business and Economics, Shanghai 201620, China; 4 Department of Applied Mathematics, Shanghai University of Finance and Economics, Shanghai 200433, China）
31-1943/U
This paper mainly studies the pricing of credit default swap （CDS） with the loan as the reference asset, and gives a model based on the obtained conclusions. In the contract of CDS, we consider that the default of the protection＇s seller is correlated with the stochastic interest rate following Vasicek model and the default state of the reference firm. We give the pricing formula of CDS and analyze the effect of the contagious risk between the counterDarties on the Dricing of CDS.
credit default swap （CDS）, contagious risk, Vasicek interest rate
ObjectType-Article-1
SourceType-Scholarly Journals-1
ObjectType-Feature-2
content type line 23
ISSN:1007-1172
1995-8188
DOI:10.1007/s12204-016-1699-y