A unified approach to Credit Default Swaption and Constant Maturity Credit Default Swap valuation

  • In this paper we examine the pricing of arbitrary credit derivatives with the Libor Market Model with Default Risk. We show, how to setup the Monte Carlo-Simulation efficiently and investigate the accuracy of closed-form solutions for Credit Default Swaps, Credit Default Swaptions and Constant Maturity Credit Default Swaps. In addition we derive a new closed-form solution for Credit Default Swaptions which allows for time-dependent volatility and abitrary correlation structure of default intensities.1

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Metadaten
Author:M. Krekel, J. Wenzel
URN (permanent link):urn:nbn:de:hbz:386-kluedo-14596
Serie (Series number):Berichte des Fraunhofer-Instituts für Techno- und Wirtschaftsmathematik (ITWM Report) (96)
Document Type:Report
Language of publication:English
Year of Completion:2006
Year of Publication:2006
Publishing Institute:Fraunhofer-Institut für Techno- und Wirtschaftsmathematik
Creating Corporation:Fraunhofer ITWM
Tag:Constant Maturity Credit Default Swap; Credit Default Swaption ; LIBOR market model ; credit risk
Constant Maturity Credit Default Swap; Credit Default Swaption ; LIBOR market model ; credit risk
Faculties / Organisational entities:Fraunhofer (ITWM)
DDC-Cassification:510 Mathematik

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