An exact formula for default swaptions' pricing in the SSRJD stochastic intensity model
AbstractWe develop and test a fast and accurate semi-analytical formula for single-name default swaptions in the context of a shifted square root jump diffusion (SSRJD) default intensity model. The model can be calibrated to the CDS term structure and a few default swaptions, to price and hedge other credit derivatives consistently. We show with numerical experiments that the model implies plausible volatility smiles.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 0812.4199.
Date of creation: Dec 2008
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Web page: http://arxiv.org/
Other versions of this item:
- Damiano Brigo & Naoufel El-Bachir, 2007. "An exact formula for default swaptions’ pricing in the SSRJD stochastic intensity model," ICMA Centre Discussion Papers in Finance icma-dp2007-14, Henley Business School, Reading University.
- C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
- C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
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