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- Author: Alan White
- Publisher: GRIN Verlag
- Year: 2018
- Pages: 25
- ISBN: 9783668668478
- ISBN-10: 3668668477
- ISBN-13: 9783668668478
- Format: PDF
- Language: English
Pricing Credit Default Swap Subject to Counterparty Risk and Collateralization (e-book) (used book) | bookbook.eu
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Description
Research Paper (undergraduate) from the year 2018 in the subject Business economics - Investment and Finance, grade: 10, , language: English, abstract: This article presents a new model for valuing a credit default swap (CDS) contract that is affected by multiple credit risks of the buyer, seller and reference entity. We show that default dependency has a significant impact on asset pricing. In fact, correlated default risk is one of the most pervasive threats in financial markets. We also show that a fully collateralized CDS is not equivalent to a risk-free one. In other words, full collateralization cannot eliminate counterparty risk completely in the CDS market.
- Author: Alan White
- Publisher: GRIN Verlag
- Year: 2018
- Pages: 25
- ISBN: 9783668668478
- ISBN-10: 3668668477
- ISBN-13: 9783668668478
- Format: PDF
- Language: English English
Research Paper (undergraduate) from the year 2018 in the subject Business economics - Investment and Finance, grade: 10, , language: English, abstract: This article presents a new model for valuing a credit default swap (CDS) contract that is affected by multiple credit risks of the buyer, seller and reference entity. We show that default dependency has a significant impact on asset pricing. In fact, correlated default risk is one of the most pervasive threats in financial markets. We also show that a fully collateralized CDS is not equivalent to a risk-free one. In other words, full collateralization cannot eliminate counterparty risk completely in the CDS market.
Reviews