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Default swaps and hedging credit baskets

Author

Listed:
  • Schmidt, Wolfgang M.

Abstract

We investigate the pricing of basket credit derivatives and their hedging with single name credit default swaps (CDS) based on a model for the joint dynamics of the fair CDS spreads. In the situation of the market flow of information being a pure jump filtration, we present an extremely efficient approach to pricing and study explicit hedging strategies.

Suggested Citation

  • Schmidt, Wolfgang M., 2007. "Default swaps and hedging credit baskets," CPQF Working Paper Series 7, Frankfurt School of Finance and Management, Centre for Practical Quantitative Finance (CPQF).
    • Handle: RePEc:zbw:cpqfwp:7
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    Cited by:

    1. Dietmar Harhoff & Elisabeth Mueller & John Van Reenen, 2014. "What are the Channels for Technology Sourcing? Panel Data Evidence from German Companies," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(1), pages 204-224, March.
    2. Alexander Libman & Vladimir Kozlov & André Schultz, 2012. "Roving Bandits in Action: Outside Option and Governmental Predation in Autocracies," Kyklos, Wiley Blackwell, vol. 65(4), pages 526-562, November.
    3. Boeing, Philipp & Mueller, Elisabeth & Sandner, Philipp, 2012. "What makes Chinese firms productive? Learning from indigenous and foreign sources of knowledge," Frankfurt School - Working Paper Series 196, Frankfurt School of Finance and Management.
    4. Kostka, Genia & Moslener, Ulf & Andreas, Jan G., 2011. "Barriers to energy efficiency improvement: Empirical evidence from small-and-medium sized enterprises in China," Frankfurt School - Working Paper Series 178, Frankfurt School of Finance and Management.
    5. Yu, Xiaofan, 2011. "A spatial interpretation of the persistency of China's provincial inequality," Frankfurt School - Working Paper Series 171, Frankfurt School of Finance and Management.
    6. Böing, Philipp & Müller, Elisabeth, 2012. "Technological Capabilities of Chinese Enterprises: Who is Going to Compete Abroad?," VfS Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century 62081, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    credit default swap; credit basket; hedging;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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