IDEAS home Printed from https://ideas.repec.org/a/wsi/apjorx/v28y2011i02ns0217595911003144.html
   My bibliography  Save this article

The Valuation Of The Basket Cds In A Primary-Subsidiary Model

Author

Listed:
  • JIANWEI LIN

    (Department of Mathematics, Tongji University, Shanghai 200092, China;
    Department of Mathematics, Putian University, Putian 351100, China)

  • GECHUN LIANG

    (The Oxford-Man Institute, University of Oxford, Oxford, OX2 6ED, UK)

  • SEN WU

    (Department of Mathematics, Tongji University, Shanghai 200092, China)

  • HARRY ZHENG

    (Department of Mathematics, Imperial College, London SW7 2BZ, UK)

Abstract

This paper considers the valuation problem of basket CDSs. Based on the construction of total hazard rates, the paper develops the work of Zheng and Jiang Zheng and Jiang (2009) from the homogenous case to the primary-subsidiary heterogenous case in the interacting intensity framework, and obtains the corresponding joint density of the default time. Moreover, the paper derives the valuation formulae for the basket CDSs with and without counterparty risk. Numerical results robustly show that, under certain conditions, using the analytical pricing formulae derived in this paper is more efficient than the Monte Carlo method for the basket CDS valuation.

Suggested Citation

  • Jianwei Lin & Gechun Liang & Sen Wu & Harry Zheng, 2011. "The Valuation Of The Basket Cds In A Primary-Subsidiary Model," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 28(02), pages 213-238.
    • Handle: RePEc:wsi:apjorx:v:28:y:2011:i:02:n:s0217595911003144
    DOI: 10.1142/S0217595911003144
    as

    Download full text from publisher

    File URL: http://www.worldscientific.com/doi/abs/10.1142/S0217595911003144
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1142/S0217595911003144?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. H. F. Coronel-Brizio & A. R. Hernandez-Montoya & Huerta-Quintanilla & M. Rodriguez-Achach & ., 2007. "Assessing symmetry of financial returns series," Papers physics/0701189, arXiv.org.
    2. Harold L. Cole & Hanno & YiLi Chien, 2007. "Macro Implications of Household Finance," 2007 Meeting Papers 479, Society for Economic Dynamics.
    3. ., 2007. "History of Law and Corporate Finance," Chapters, in: Law and Corporate Finance, chapter 4, Edward Elgar Publishing.
    4. Oecd, 2007. "Financial Markets Highlights November 2007," Financial Market Trends, OECD Publishing, vol. 2007(2), pages 11-25.
    5. Oecd, 2007. "Trends in Environmental Finance in EECCA," OECD Papers, OECD Publishing, vol. 7(3), pages 1-50.
    6. ., 2007. "The Role of Law in Corporate Finance," Chapters, in: Law and Corporate Finance, chapter 1, Edward Elgar Publishing.
    7. Oecd, 2007. "Financial Markets Highlights - May 2007," Financial Market Trends, OECD Publishing, vol. 2007(1), pages 11-22.
    8. ., 2007. "The Economics of the Law and Corporate Finance," Chapters, in: Law and Corporate Finance, chapter 2, Edward Elgar Publishing.
    9. Oecd, 2007. "Update on Financial Market Developments," Financial Market Trends, OECD Publishing, vol. 2007(1), pages 23-33.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Casu, Barbara & Girardone, Claudia, 2010. "Integration and efficiency convergence in EU banking markets," Omega, Elsevier, vol. 38(5), pages 260-267, October.
    2. Sánchez-Cano, Julieta Evangelina, 2012. "The public policies of the mexican agricutural sector in the framework of the international economy," eseconomía, Escuela Superior de Economía, Instituto Politécnico Nacional, vol. 0(33), pages 45-77, primer tr.
    3. Brière, Marie & Chapelle, Ariane & Szafarz, Ariane, 2012. "No contagion, only globalization and flight to quality," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1729-1744.
    4. Prabowo, Rudy & Thelwall, Mike, 2009. "Sentiment analysis: A combined approach," Journal of Informetrics, Elsevier, vol. 3(2), pages 143-157.
    5. Reint Gropp & Anil K Kashyap, 2010. "A New Metric for Banking Integration in Europe," NBER Chapters, in: Europe and the Euro, pages 219-246, National Bureau of Economic Research, Inc.
    6. Weber, Thomas A., 2014. "On the (non-)equivalence of IRR and NPV," Journal of Mathematical Economics, Elsevier, vol. 52(C), pages 25-39.
    7. Décamps, Jean-Paul & Mariotti, Thomas & Rochet, Jean-Charles & Villeneuve, Stéphane, 2008. "Free Cash-Flow, Issuance Costs and Stock Price Volatility," IDEI Working Papers 518, Institut d'Économie Industrielle (IDEI), Toulouse.
    8. Liviu-Adrian ?aga, 2015. "Capital structure ? Romanian and Eastern-Europe companies," Proceedings of International Academic Conferences 1003806, International Institute of Social and Economic Sciences.
    9. Sun, Zhe & Vinig, Tsvi & Hosman, Thomas Daniël, 2017. "The financing of Chinese outbound mergers and acquisitions: Is there a distortion between state-owned enterprises and privately owned enterprises?," Research in International Business and Finance, Elsevier, vol. 39(PA), pages 377-388.
    10. Hwee Kwan Chow, 2014. "International Transmission Of Interest Rates And The Open Economy Trilemma In Asia," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 59(03), pages 1-18.
    11. Sadhan Malik & Subodh Chandra Pal & Biswajit Das & Rabin Chakrabortty, 2020. "Assessment of vegetation status of Sali River basin, a tributary of Damodar River in Bankura District, West Bengal, using satellite data," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 22(6), pages 5651-5685, August.
    12. Hanno Lustig & Stijn Van Nieuwerburgh & Adrien Verdelhan, 2013. "The Wealth-Consumption Ratio," The Review of Asset Pricing Studies, Oxford University Press, vol. 3(1), pages 38-94.
    13. Akpaeti, Aniekan Jim, 2013. "Does Financial Sector Reforms Affect Agricultural Investments In Nigeria? A Cointegration And Var Approach," International Journal of Food and Agricultural Economics (IJFAEC), Alanya Alaaddin Keykubat University, Department of Economics and Finance, vol. 1(2), pages 1-16, October.
    14. Chor, Davin & Manova, Kalina, 2012. "Off the cliff and back? Credit conditions and international trade during the global financial crisis," Journal of International Economics, Elsevier, vol. 87(1), pages 117-133.
    15. De Graeve, Ferre & Dossche, Maarten & Emiris, Marina & Sneessens, Henri & Wouters, Raf, 2010. "Risk premiums and macroeconomic dynamics in a heterogeneous agent model," Journal of Economic Dynamics and Control, Elsevier, vol. 34(9), pages 1680-1699, September.
    16. Rodríguez-Martínez, C.M. & Coronel-Brizio, H.F. & Hernández-Montoya, A.R., 2021. "A multi-scale symmetry analysis of uninterrupted trends returns in daily financial indices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 574(C).
    17. Chien, YiLi & Naknoi, Kanda, 2015. "The risk premium and long-run global imbalances," Journal of Monetary Economics, Elsevier, vol. 76(C), pages 299-315.
    18. Kollmann, Robert, 2009. "Domestic Financial Frictions: Implications for International Risk Sharing, Real Exchange Rate Volatility and International Business Cycles," MPRA Paper 70348, University Library of Munich, Germany.
    19. C. M. Rodr'iguez-Mart'inez & H. F. Coronel-Brizio & A. R. Hern'andez-Montoya, 2019. "A multi-scale symmetry analysis of uninterrupted trends returns of daily financial indices," Papers 1908.11204, arXiv.org.
    20. Beatrice Cherrier & Jean-Baptiste Fleury, 2017. "Economists’ interest in collective decision after World War II: a history," Public Choice, Springer, vol. 172(1), pages 23-44, July.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:apjorx:v:28:y:2011:i:02:n:s0217595911003144. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscinet.com/apjor/apjor.shtml .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.