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EnglishWe obtain a quasi-analytical approximation of the survival probability in the credit risk modelproposed in [Madan, D.B. and Unal, H., Pricing the risk of default.Rev. Deriv. Res., 1998,2(2), 121–160]. Such a formula, which extensive numerical simulations reveal to be accurate andcomputationally fast, can also be employed for pricing credit default swaps (CDSs). Specifically,we derive a quasi-analytical approximate expression for CDS par spreads, and we use it to estimatethe parameters of the model. The results obtained show a rather satisfactory agreement betweentheoretical and real market data.
We obtain a quasi-analytical approximation of the survival probability in the credit risk model proposed in [Madan, D.B. and Unal, H., Pricing the risk of default. Rev. Deriv. Res., 1998, 2(2), 121–160]. Such a formula, which extensive numerical simulations reveal to be accurate and computationally fast, can also be employed for pricing credit default swaps (CDSs). Specifically, we derive a quasi-analytical approximate expression for CDS par spreads, and we use it to estimate the parameters of the model. The results obtained show a rather satisfactory agreement between theoretical and real market data.
| Titolo: | Computing the survival probability in the Madan–Unal credit risk model: application to the CDS market |
| Autore/i: | BALLESTRA, LUCA VINCENZO; Graziella Pacelli; Davide Radi |
| Autore/i Unibo: | |
| Anno: | 2017 |
| Rivista: | |
| Digital Object Identifier (DOI): | http://dx.doi.org/10.1080/14697688.2016.1189590 |
| Abstract: | We obtain a quasi-analytical approximation of the survival probability in the credit risk modelproposed in [Madan, D.B. and Unal, H., Pricing the risk of default.Rev. Deriv. Res., 1998,2(2), 121–160]. Such a formula, which extensive numerical simulations reveal to be accurate andcomputationally fast, can also be employed for pricing credit default swaps (CDSs). Specifically,we derive a quasi-analytical approximate expression for CDS par spreads, and we use it to estimatethe parameters of the model. The results obtained show a rather satisfactory agreement betweentheoretical and real market data. |
| Abstract: | We obtain a quasi-analytical approximation of the survival probability in the credit risk model proposed in [Madan, D.B. and Unal, H., Pricing the risk of default. Rev. Deriv. Res., 1998, 2(2), 121–160]. Such a formula, which extensive numerical simulations reveal to be accurate and computationally fast, can also be employed for pricing credit default swaps (CDSs). Specifically, we derive a quasi-analytical approximate expression for CDS par spreads, and we use it to estimate the parameters of the model. The results obtained show a rather satisfactory agreement between theoretical and real market data. |
| Data stato definitivo: | 2020-11-22T14:02:31Z |
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