The Valuation of Credit Default Swap with Counterparty Risk and Collateralization

Abstract

This article presents a new model for valuing a credit default swap (CDS) contract that is affected by multiple credit risks of the buyer, seller and reference entity. We show that default dependency has a significant impact on asset pricing. In fact, correlated default risk is one of the most pervasive threats in financial markets. We also show that a fully collateralized CDS is not equivalent to a risk-free one. In other words, full collateralization cannot eliminate counterparty risk completely in the CDS market.

Other Versions

No versions found

Links

PhilArchive

External links

  • This entry has no external links. Add one.
Setup an account with your affiliations in order to access resources via your University's proxy server

Through your library

  • Only published works are available at libraries.

Analytics

Added to PP
2020-10-19

Downloads
263 (#88,820)

6 months
113 (#56,945)

Historical graph of downloads
How can I increase my downloads?

Author's Profile

Citations of this work

No citations found.

Add more citations

References found in this work

Add more references