In this research, we conduct specification analysis of structural credit risk models with stochastic volatility using term structure Credit Default Swap (CDS) spreads and equity form high-frequency return data. We also test five representatives samples 93 single name CDS contracts from January 2010 -2022. The model consider are; the standard Merton(1974) model, Black & Cox (1976) flat barri...

We apply copula functions to evaluate counterpart risk in swap transactions. Using copulas allows to generalise the approach proposed by Sorensen and Bollier (1994), allowing for dependence between swap rates and counterparty default.. Counterpart risk is represented by a sequence of vulnerable swaptions, which are priced using Cherubini and Luciano (2002) approach. Using copulas grants maximum...

In recent years, the market for credit default swaps (CDSs) has expanded dramatically. In these financial contracts, a sequence of payments is promised in return for protection against the credit losses in the event of default. By offering investors the chance to gain or sell risk exposure to a reference entity without buying or selling the underlying bond or loan, credit default swaps have gre...

File reference: blackdef.tex We develop the theory of hedging a European call option in the Black model augmented by the possibility of default in the underlying asset. We model default as a drop to zero and we assume that the credit default swap rate is constant. In this setting, we show that the call's payoff can be perfect replicated by dynamic trading in the underlying futures and in credit...

We examine the effects of credit default swaps (CDS), a major type of over-thecounter derivative, on the corporate liquidity management of the reference firms. CDS help firms to access the credit market since the lenders can hedge their credit risk more easily using these contracts. However, CDS-protected creditors can be tougher in debt renegotiations and less willing to support distressed bor...

The study aims to define the sources of Turkey’s sovereign CDS spread changes develop policies that stabilize spreads since they have a volatile and increasing trend, especially in last two years. In this context, monthly data 13 factors related international, macroeconomic, market between 2011/1 2019/12 are used by dividing dataset into three periods as full period (2011-2019), stability (2011...