Market frictions and the pricing of sovereign credit default swaps
نویسندگان
چکیده
منابع مشابه
Sovereign Debt Renegotiation and Credit Default Swaps
A credit default swap (CDS) contract provides insurance against default. After a country defaults, the country and its lenders usually negotiate over the share of the defaulted debt to be repaid. This paper incorporates CDS contracts into a sovereign default model and demonstrates that the existence of a CDS market results in lower default probability, higher debt levels, and lower nancing cost...
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In this paper, we develop a generalized affine model to characterize correlated credit risk of multi-firms. When valuing credit derivatives, this new approach allows to incorporate correlative market and credit risk, interdependent default risk structure and counterparty risk into consideration. We have demonstrated our affine model not only combines the existing structural models and intensity...
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First passage models, where corporate assets undergo a random walk and default occurs if the assets fall below a threshold, provide an attractive framework for modeling the default process. Recently such models have been generalized to allow a fluctuating default threshold or equivalently a fluctuating total recovery fraction R. For a given company a particular type of debt has a recovery fract...
متن کاملPricing and Trading Credit Default Swaps under Deterministic Intensity∗
∗This work was completed during our visit to the Isaac Newton Institute for Mathematical Sciences in Cambridge. We thank the organizers of the programme Developments in Quantitative Finance for the kind invitation. †The research of T.R. Bielecki was supported by NSF Grant 0202851 and Moody’s Corporation grant 5-55411. ‡The research of M. Jeanblanc was supported by Zéliade, Itô33, and Moody’s Co...
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We introduce a discrete time no-arbitrage model with observable covariates, which allows for a closed form solution for the value of credit default swaps (CDS). The default intensity is speci ed as a quadratic function of the covariates, ensuring that the intensity function is always positive. The model yields economically plausible results in terms of t, sign of coe¢ cients and statistical si...
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ژورنال
عنوان ژورنال: Journal of International Money and Finance
سال: 2016
ISSN: 0261-5606
DOI: 10.1016/j.jimonfin.2015.04.006