Pricing for Basket CDS and LCDS

Wang, Tao and Liang, Jin and Yang, Xiaoli (2012) Pricing for Basket CDS and LCDS. Modern Economy, 03 (02). pp. 171-178. ISSN 2152-7245

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Abstract

In this paper, under the reduced form framework and “Bottom Up” method, a model for pricing a basket Loan-only Credit Default Swap (LCDS), with the negative correlation between prepayment and default, is established. A general pricing formula for it is obtained, where one factor CIR (Cox-Ingersoll-Ross) and ICIR (Inversed CIR) models are used to describe the negative correlation between prepayment and default. In this situation, the positivity of prepayment and default intensity processes are guaranteed. Numerical computations are presented.

Item Type: Article
Subjects: AP Academic Press > Multidisciplinary
Depositing User: Unnamed user with email support@apacademicpress.com
Date Deposited: 04 Jul 2023 04:19
Last Modified: 05 Jun 2024 09:54
URI: http://info.openarchivespress.com/id/eprint/1697

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