An exact formula for default swaptions’ pricing in the SSRJD stochastic intensity model
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.
|Date of creation:||Nov 2007|
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- Darrell Duffie & Jun Pan & Kenneth Singleton, 2000.
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