A factor model for joint default probabilities. Pricing of CDS, index swaps and index tranches

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• 作者：Catalin Cantia ; Radu Tunaru ; ^{r.tunaru@kent.ac.uk}
• 关键词：G12 ; C51 ; C63
• 刊名：Insurance: Mathematics and Economics
• 出版年：2017
• 出版时间：January 2017
• 年：2017
• 卷：72
• 期：Complete
• 页码：21-35
• 全文大小：935 K
• 卷排序：72

文摘

We propose a factor model for valuation of CDS, CDSI and CDO. The model is a first-passage distribution of Brownian motion continuous time-changed. The credit quality process is driven by a mean reverting Levy OU volatility process. The model is capable to reproduce the credit gap risk. FFT computational tools are developed to calculate the distribution of losses.