RT Journal Article
SR Electronic
T1 Valuing Default Swaps Under Market and Credit Risk Correlation
JF The Journal of Fixed Income
FD Institutional Investor Journals
SP 7
OP 19
DO 10.3905/jfi.2002.319308
VO 11
IS 4
A1 Robert A Jarrow
A1 Yildiray Yildirim
YR 2002
UL https://pm-research.com/content/11/4/7.abstract
AB 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.