Abstract
This article provides a simple analytic formula for valuing default swaps when both market and credit risk are correlated. Numerical implementation is illustrated by deducing the default probability parameters implicit in default swap quotes for 22 companies over a ten-week period. The results are compared to implicit estimates for the standard model (a special case of this approach) where market and credit risk are statistically independent.
- © 2002 Pageant Media Ltd
Don’t have access? Click here to request a demo
Alternatively, Call a member of the team to discuss membership options
US and Overseas: +1 646-931-9045
UK: 0207 139 1600