Semi-analytic pricing formulas for basket credit-linked notes with and without counterparty risks

Autor:	Yongzeng Lai, Junmei Ma, Xuan Yang, Xiaomei Zhang
Jazyk:	angličtina
Rok vydání:	2020
Předmět:	basket cln counterparty risk hazard rate partial differential equation affine structure Control engineering systems. Automatic machinery (General) TJ212-225 Systems engineering TA168
Zdroj:	Systems Science & Control Engineering, Vol 8, Iss 1, Pp 576-604 (2020)
Druh dokumentu:	article
ISSN:	2164-2583 21642583 06080081
DOI:	10.1080/21642583.2020.1851804
Popis:	This paper discusses the pricing of basket credit linked notes (BCLN) under the reduced model. Three types of BCLNs are discussed: the first, the second and the mth-to-default BCLNs with and without counterparty risks. Based on conditional independence, the joint distribution of default times can be calculated and thus the price problems are transformed into partial differential equation (PDE) forms. Then the semi-analytical pricing formulas for the above BCLNs are obtained with PDE method and the calculation of credit valuation adjustments are also obtained. Finally, numerical test results show the high precision of the derived pricing formulas.
Databáze:	Directory of Open Access Journals
Externí odkaz:	https://doaj.org/article/a7a723cc7a034dabbf8b59d060800819 Zobrazit plný text záznamu View record in DOAJ