Model of counterparty risk with geometric attenuation and valuation of CDS

作     者：Bai Yunfen1,2 Hu Xinhua3,4 Ye Zhongxing1(1 Department of Mathematics, Shanghai Jiaotong University, Shanghai 200240, China)(2 Department of Mathematics, Shijiazhuang College, Shijiazhuang 050035, China)(3 Guanghua Institute of Management, Peking University, Beijing 100032, China)(4 Postdoctoral Workstation of ICBC, Beijing 100036, China) 

出 版 物：《Journal of Southeast University(English Edition)》 (东南大学学报（英文版）)

年 卷 期：2008年第24卷第S1期

页      面：196-198页

学科分类：12[管理学] 02[经济学] 0202[经济学-应用经济学] 1204[管理学-公共管理] 020204[经济学-金融学（含∶保险学）] 120404[管理学-社会保障] 

基　　金：The National Basic Research Program of China (973 Program)(No.2007CB814903) the National Natural Science Foundationof China (No.70671069) 

主　　题：counterparty risk dependent default attenuation function change of measure credit default swap 

摘      要：To investigate the impact of microstructure interdependency of a counterparty explicitly, a geometric function is introduced in one firm s default intensity to reflect the attenuation behavior of the impact of its counterparty firm s default. The general joint distribution and marginal distributions of default times are derived by employing the change of measure. The fair premium of a vanilla CDS (credit default swap) is obtained in continuous and discrete contexts, respectively. The swap premium in a discrete context is similar to the accumulated interest during the period between two payment days, and the short rate is the swap rate in a continuous context.