TY - JOUR T1 - An Exact Structural Model for Evaluating Credit Default Swaps: Theory and Empirical Evidence JF - The Journal of Fixed Income DO - 10.3905/jfi.2022.1.149 SP - jfi.2022.1.149 AU - Ren-Raw Chen AU - Pei-Lin Hsieh Y1 - 2022/11/29 UR - https://pm-research.com/content/early/2022/11/29/jfi.2022.1.149.abstract N2 - Using structural models for credit default swaps (CDS) has been difficult. Existing models all adopt short-cuts as approximations. In this article, we provide an accurate and efficient solution to the price of the credit default swap. The main result is a Theorem in Section 2. In an empirical study, we show how our model can properly capture CDS (credit default swap) exposure to interest rate volatility and asset volatility. Furthermore, we apply the new model to study: (1) the interactions among market, credit, and interest risks, (2) the consistency with the reduced-form credit risk models, and (3) implications to capital structure arbitrage. ER -