System credit events and the valuation of credit default swaps

被引：0
|
作者：
Yang X. [1 ,2 ]
Hu G.-Q. [1 ]
Jiang J.-L. [2 ]
机构：
[1] College of Economics, Jinan University, Guangzhou, 510630, Guangdong
[2] College of Economics, Guangzhou College of South China University of Technology, Guangzhou, 510800, Guangdong
来源：
Hu, Guo-Qiang (hugq2006@163.com) | 1600年 / South China University of Technology卷 / 33期
关键词：
Associated default; Bilateral counterparty risk; Credit default swap; System credit events;
D O I：
10.7641/CTA.2016.41092
中图分类号：
学科分类号：
摘要：
Taking system credit events as the carrier, we study the valuation of credit default swap adjusted by bilateral counterparty risk. Our study shows that: 1) a complete credit event set will form a system of credit risk and can be used as a valuation basis for credit default swaps (CDS); 2) in the CDS valuation, the default risk of buyer cannot be ignored. If it happens, a wrong price will emerge. Since the wrong price is lower than the reasonable one, the credit-protected seller will sustain losses; 3) the replacement cost of CDS deal cannot be ignored either. Because of the existence of the replacement cost, the value of CDS contracts will produce a supernormal change, depending on the current market price of the contract; 4) the price of CDS is very sensitive to the credit value difference of the reference assets; the credit value difference will cause significant change in the price of CDS. © 2016, Editorial Department of Control Theory & Applications South China University of Technology. All right reserved.
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页码：47 / 53
页数：6
相关论文
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