The Study of Credit Default Swaps Pricing Model
Date Issued
2006
Date
2006
Author(s)
Li, Chian-Yun
DOI
zh-TW
Abstract
Credit derivatives are a specific class of financial instruments that allow users to manage credit risk by isolating such risk from the underlying financial assets. Although small compared to other derivatives and securities markets, the credit derivatives market has become one of the faster-growing derivatives markets since the late 1990s. By observing the booming trading volume of the credit derivatives in recent years, we can realize that there are more and more participants getting into this unique market. In Taiwan, we can also trade part of credit derivatives. It is the right time to pay attention to the credit default swap (CDS), the simplest type of the so-called credit derivatives, with which people can deal with the most primitive credit risk and build more complicated credit products. With the rapid growth of the credit derivatives market and the import role of CDS in the market, much attention has been given to the pricing of this financial instrument. This paper will review theories in pricing CDS and empirical studies on CDS. Current CDS pricing models can be classified into two groups: structural models and reduced-form models. The empirical studies on CDS includes the choices of recovery form, CDS premium determinants, performance of the theoretical pricing models, differences between theory and practice, and the lead-lag relationship between the CDS market and equity and bond markets.
Subjects
信用違約交換
Credit Default Swap
CDS
Type
thesis
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