A structural approach to pricing credit default swaps with credit and debt value adjustments
AbstractA multi-dimensional extension of the structural default model with firms' values driven by diffusion processes with Marshall-Olkin-inspired correlation structure is presented. Semi-analytical methods for solving the forward calibration problem and backward pricing problem in three dimensions are developed. The model is used to analyze bilateral counterparty risk for credit default swaps and evaluate the corresponding credit and debt value adjustments.
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Bibliographic InfoPaper provided by arXiv.org in its series Papers with number 1206.3104.
Date of creation: Jun 2012
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- Hua He William P. Keirstead and Joachim Rebholz., 1995.
Research Program in Finance Working Papers
RPF-248, University of California at Berkeley.
- Zhou, Chunsheng, 2001. "An Analysis of Default Correlations and Multiple Defaults," Review of Financial Studies, Society for Financial Studies, vol. 14(2), pages 555-76.
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