A hyperbolic function is introduced to reflect the attenuation effect of one firm＇s default to its partner. If two firms are competitors （copartners）, the default intensity of one firm will decrease （increase） ab...A hyperbolic function is introduced to reflect the attenuation effect of one firm＇s default to its partner. If two firms are competitors （copartners）, the default intensity of one firm will decrease （increase） abruptly when the other firm defaults. As time goes on, the impact will decrease gradually until extinct. In this model, the joint distribution and marginal distributions of default times are derived by employing the change of measure, and the fair swap premium of a credit default swap （CDS） can be valued.展开更多
In this paper we analyze the main characteristics of correlative clients and the revolver loan and reduced form models for the correlative clients A and B in real-life. This is done by decomposing the default intensit...In this paper we analyze the main characteristics of correlative clients and the revolver loan and reduced form models for the correlative clients A and B in real-life. This is done by decomposing the default intensity into specific default intensity and homogenous default intensity. We also use a mathematical formula of the default joint distribution function and the marginal distribution function in the physical measure to deduce the martingale measure. The modeling idea on pricing the revolver loan with client A is presented by applying reduced form model. Through calculating the cost and income fund flows under the martingale measure, the framework of a “break-even” pricing model is established. The conclusion is that the interest rate of a revolver loan for client A on the “break-even” point is not related to the maximum authorized amount and the drawdown amount at that time under some assumptions, but only rests with credit rating and homogenous default intensity of client A and B as well as loan term of client A.展开更多
To investigate the impact of microstructure interdependency of a counterparty explicitly, a geometric function is introduced in one firm's default intensity to reflect the attenuation behavior of the impact of its...To investigate the impact of microstructure interdependency of a counterparty explicitly, a geometric function is introduced in one firm's default intensity to reflect the attenuation behavior of the impact of its counterparty firm's default. The general joint distribution and marginal distributions of default times are derived by employing the change of measure. The fair premium of a vanilla CDS (credit default swap) is obtained in continuous and discrete contexts, respectively. The swap premium in a discrete context is similar to the accumulated interest during the period between two payment days, and the short rate is the swap rate in a continuous context.展开更多
基金the National Basic Research Program of China(973 Program)(No.2007CB814903)the National Natural Science Foundation of China(No.70671069)
文摘A hyperbolic function is introduced to reflect the attenuation effect of one firm＇s default to its partner. If two firms are competitors （copartners）, the default intensity of one firm will decrease （increase） abruptly when the other firm defaults. As time goes on, the impact will decrease gradually until extinct. In this model, the joint distribution and marginal distributions of default times are derived by employing the change of measure, and the fair swap premium of a credit default swap （CDS） can be valued.
文摘In this paper we analyze the main characteristics of correlative clients and the revolver loan and reduced form models for the correlative clients A and B in real-life. This is done by decomposing the default intensity into specific default intensity and homogenous default intensity. We also use a mathematical formula of the default joint distribution function and the marginal distribution function in the physical measure to deduce the martingale measure. The modeling idea on pricing the revolver loan with client A is presented by applying reduced form model. Through calculating the cost and income fund flows under the martingale measure, the framework of a “break-even” pricing model is established. The conclusion is that the interest rate of a revolver loan for client A on the “break-even” point is not related to the maximum authorized amount and the drawdown amount at that time under some assumptions, but only rests with credit rating and homogenous default intensity of client A and B as well as loan term of client A.
基金The National Basic Research Program of China (973 Program)(No.2007CB814903)the National Natural Science Foundationof China (No.70671069)
文摘To investigate the impact of microstructure interdependency of a counterparty explicitly, a geometric function is introduced in one firm's default intensity to reflect the attenuation behavior of the impact of its counterparty firm's default. The general joint distribution and marginal distributions of default times are derived by employing the change of measure. The fair premium of a vanilla CDS (credit default swap) is obtained in continuous and discrete contexts, respectively. The swap premium in a discrete context is similar to the accumulated interest during the period between two payment days, and the short rate is the swap rate in a continuous context.
