Advanced Search
MyIDEAS: Login

An exact formula for default swaptions’ pricing in the SSRJD stochastic intensity model

Contents:

Author Info

  • Damiano Brigo

    (Q-SCI, DerivativeFitch / QFR - Fitch Ratings)

  • Naoufel El-Bachir

    ()
    (ICMA Centre, University of Reading)

Abstract

We develop and test a fast and accurate semi-analytical formula for single-name default swaptions in the context of the shifted square root jump diffusion (SSRJD) default intensity model. The formula consists of a decomposition of an option on a summation of survival probabilities in a summation of options on the underlying survival probabilities, where the strike for each option is adjusted.

Download Info

If 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.
File URL: http://www.icmacentre.ac.uk/files/pdf/dps/dp2007_14.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Henley Business School, Reading University in its series ICMA Centre Discussion Papers in Finance with number icma-dp2007-14.

as in new window
Length: 18 pages
Date of creation: Nov 2007
Date of revision:
Handle: RePEc:rdg:icmadp:icma-dp2007-14

Contact details of provider:
Postal: PO Box 218, Whiteknights, Reading, Berks, RG6 6AA
Phone: +44 (0) 118 378 8226
Fax: +44 (0) 118 975 0236
Web page: http://www.henley.reading.ac.uk/
More information through EDIRC

Related research

Keywords: Credit derivatives; Credit Default Swap; Credit Default Swaption; Jump-diffusion; Stochastic intensity; Doubly stochastic poisson process; Cox process; Semi-Analytic formula; Numerical integration;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Farshid Jamshidian, 2004. "Valuation of credit default swaps and swaptions," Finance and Stochastics, Springer, vol. 8(3), pages 343-371, 08.
  2. Damiano Brigo & Aurélien Alfonsi, 2005. "Credit default swap calibration and derivatives pricing with the SSRD stochastic intensity model," Finance and Stochastics, Springer, vol. 9(1), pages 29-42, January.
  3. Cox, John C & Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1985. "A Theory of the Term Structure of Interest Rates," Econometrica, Econometric Society, vol. 53(2), pages 385-407, March.
  4. Damiano Brigo & Naoufel El-Bachir, 2006. "Credit Derivatives Pricing with a Smile-Extended Jump Stochastic Intensity Model," ICMA Centre Discussion Papers in Finance icma-dp2006-13, Henley Business School, Reading University.
  5. Darrell Duffie & Jun Pan & Kenneth Singleton, 1999. "Transform Analysis and Asset Pricing for Affine Jump-Diffusions," NBER Working Papers 7105, National Bureau of Economic Research, Inc.
  6. Jamshidian, Farshid, 1989. " An Exact Bond Option Formula," Journal of Finance, American Finance Association, vol. 44(1), pages 205-09, March.
  7. Black, Fischer, 1976. "The pricing of commodity contracts," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 167-179.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Damiano Brigo & Andrea Pallavicini & Vasileios Papatheodorou, 2009. "Bilateral counterparty risk valuation for interest-rate products: impact of volatilities and correlations," Papers 0911.3331, arXiv.org, revised Feb 2010.
  2. Damiano Brigo, 2011. "Counterparty Risk FAQ: Credit VaR, PFE, CVA, DVA, Closeout, Netting, Collateral, Re-hypothecation, WWR, Basel, Funding, CCDS and Margin Lending," Papers 1111.1331, arXiv.org, revised Jun 2012.
  3. Damiano Brigo & Andrea Pallavicini & Roberto Torresetti, 2009. "Credit models and the crisis, or: how I learned to stop worrying and love the CDOs," Papers 0912.5427, arXiv.org, revised Feb 2010.
  4. Naoufel El-Bachir & Damiano Brigo, 2008. "An analytically tractable time-changed jump-diffusion default intensity model," ICMA Centre Discussion Papers in Finance icma-dp2008-06, Henley Business School, Reading University.
  5. Damiano Brigo & Mirela Predescu & Agostino Capponi, 2010. "Credit Default Swaps Liquidity modeling: A survey," Papers 1003.0889, arXiv.org, revised Mar 2010.
  6. Michele Leonardo Bianchi, 2012. "An empirical comparison of alternative credit default swap pricing models," Temi di discussione (Economic working papers) 882, Bank of Italy, Economic Research and International Relations Area.
  7. Richard J Martin, 2011. "A CDS Option Miscellany," Papers 1201.0111, arXiv.org.
  8. Tomasz Bielecki & Monique Jeanblanc & Marek Rutkowski, 2011. "Hedging of a credit default swaption in the CIR default intensity model," Finance and Stochastics, Springer, vol. 15(3), pages 541-572, September.
  9. Damiano Brigo & Massimo Morini & Marco Tarenghi, 2009. "Credit Calibration with Structural Models: The Lehman case and Equity Swaps under Counterparty Risk," Papers 0912.4404, arXiv.org.
  10. Damiano Brigo & Kyriakos Chourdakis & Imane Bakkar, 2009. "Counterparty risk valuation for Energy-Commodities swaps: Impact of volatilities and correlation," Papers 0901.1099, arXiv.org.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:rdg:icmadp:icma-dp2007-14. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ed Quick).

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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