A Model for Counterparty Risk with Geometric Attenuation Effect and the Valuation of CDS
AbstractIn this paper, a geometric function is introduced to reflect the attenuation speed of impact of one firm's default to its partner. If two firms are competitions (copartners), the default intensity of one firm will decrease (increase) abruptly when the other firm defaults. As time goes on, the impact will decrease gradually until extinct. In this model, the joint distribution and marginal distributions of default times are derived by employing the change of measure, so can we value the fair swap premium of a CDS.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 0706.3331.
Date of creation: Jun 2007
Date of revision:
Contact details of provider:
Web page: http://arxiv.org/
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Xavier Vives, 2011.
"Endogenous Public Information and Welfare,"
CESifo Working Paper Series
3492, CESifo Group Munich.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (arXiv administrators).
If references are entirely missing, you can add them using this form.