文档介绍：Credit Default Swap Model © copyright THC 2003. All rights reserved by Thomas pany, NY, NY.
reference number 69 classification# 100501 Instructions
Version level basic To calculate the annual premium of credit default swap
publication date 5-03
author Hanyang Financial Engineering Lab.
affiliation Hanyang University input
email address ******@
last revised date 12-03 output
references of "The Oxford Guide to Financial Modeling" by Thomas . Ho and Sang Bin Lee, 2004, Oxford University Press
Descriptions
CDS pays an amount at the event of a default on the bond.
financial model class Convertibles, MBS/CMO and other Bonds: The Behavioral Models
issuer/modeler swap desks
model type credit derivatives
risk sources firm value
risk distribution lognormal
economic assumptions structural model
technical assumptions pounding
key words digital credit default swap
Links
data /
financial models 7. Bond Arithmetic, 8. Bond Model
Inputs
face value of bond 100
bond maturity 10
coupon rate coupons are paid annually.
firm value 150
firm volatility
risk-free rate
swap termination (year) 10
swap amount 5
upward jump size
p
1-p
Outputs
Annual Premium of CDS
Premium is defined as the annual payment for the CDS for the tenor of the swap (paid at the end of each year)
Interim Calculations
firm value
time 0 1 2 3
debt
time 0 1 2 3
equity
time 0 1 2 3
CDS value
time 0 1