A CDS Option Miscellany
AbstractCDS options allow investors to express a view on spread volatility and obtain a wider range of payoffs than are possible with vanilla CDS. We give a detailed exposition of different types of single-name CDS option, including options with upfront protection payment, recovery options and recovery swaps, and also presents a new formula for the index option. The emphasis is on using the Black-76 formula where possible and ensuring consistency within asset classes. In the framework shown here the `armageddon event' does not require special attention.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1201.0111.
Date of creation: Dec 2011
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Web page: http://arxiv.org/
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-10 (All new papers)
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