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Default Correlations within Credit Valuation

Svensson, Sofie (2016) FMS820 20161
Mathematical Statistics
Abstract
This paper focuses on pricing of basket Credit Default Swaps. The credit market instruments
such as CDSs and CDOs are introduced. The concepts of trading these
derivatives in basket CDSs divided into tranches is also of big importance. Dierent
pricing models are presented and compared. Those are Semi-Analytic Valuation model
with a Copula approach used together with the methods compound and base correlation
Also two contagion models are presented, one pure contagion and one contagion
Copula mixture model. They are compared to each other to see how the prices dier
for dierent tranches and premium payments. It is impossible to say which model
prices right, but the main conclusion is that the prices dier. The models need to be
... (More)
This paper focuses on pricing of basket Credit Default Swaps. The credit market instruments
such as CDSs and CDOs are introduced. The concepts of trading these
derivatives in basket CDSs divided into tranches is also of big importance. Dierent
pricing models are presented and compared. Those are Semi-Analytic Valuation model
with a Copula approach used together with the methods compound and base correlation
Also two contagion models are presented, one pure contagion and one contagion
Copula mixture model. They are compared to each other to see how the prices dier
for dierent tranches and premium payments. It is impossible to say which model
prices right, but the main conclusion is that the prices dier. The models need to be
further investigated in order to decide which one is the best for which purpose. (Less)
Please use this url to cite or link to this publication:
author
Svensson, Sofie
supervisor
organization
course
FMS820 20161
year
type
H2 - Master's Degree (Two Years)
subject
language
English
id
8884279
date added to LUP
2016-06-22 08:06:56
date last changed
2016-06-22 08:06:56
@misc{8884279,
  abstract     = {This paper focuses on pricing of basket Credit Default Swaps. The credit market instruments
such as CDSs and CDOs are introduced. The concepts of trading these
derivatives in basket CDSs divided into tranches is also of big importance. Dierent
pricing models are presented and compared. Those are Semi-Analytic Valuation model
with a Copula approach used together with the methods compound and base correlation
Also two contagion models are presented, one pure contagion and one contagion
Copula mixture model. They are compared to each other to see how the prices dier
for dierent tranches and premium payments. It is impossible to say which model
prices right, but the main conclusion is that the prices dier. The models need to be
further investigated in order to decide which one is the best for which purpose.},
  author       = {Svensson, Sofie},
  language     = {eng},
  note         = {Student Paper},
  title        = {Default Correlations within Credit Valuation},
  year         = {2016},
}