Valuation of credit default swaps and swaptions
type: Item
instance of: scholarly article
title: Valuation of credit default swaps and swaptions
zbMATH Open document ID: 1063.91034
author: Farshid Jamshidian
published in: Finance and Stochastics
publication date: 2005-05-20T00:00:00Z
review text: This paper aims to develop a valuation framework for single-name credit derivatives that combine an arbitrary numeraire with a general conditional probability of survival arising from a subfiltration. The author starts from first financial principles and proceeds in a self-contained manner within a general probabilistic framework. New concepts and terminology are introduced to facilitate the discussion and to especially highlight the views on cash flow modelling and change of numeraire in presence of default. New concepts and results are presented for the evaluation of credit swaptions. A new formula on fractional recovery of a pre-default value is derived. The Black-Scholes formula for credit default swaptions is shown to serve as a least-squares approximation to the general case.
reviewed by: Yuliya S. Mishura
Mathematics Subject Classification ID: 91G40
Mathematics Subject Classification ID: 91G20
Mathematics Subject Classification ID: 60G44
Mathematics Subject Classification ID: 60G40
zbMATH DE Number: 2169539
zbMATH Keywords: subfiltration
zbMATH Keywords: conditional survival probability
zbMATH Keywords: preprice
zbMATH Keywords: prenumeraire
zbMATH Keywords: recovery
MaRDI profile type: Publication
full work available at URL: s00780-004-0122-y
OpenAlex ID: W1995684172
DOI: 10.1007/S00780-004-0122-Y
description: scientific article; zbMATH DE number 2169539