A Note on Survival Measures and the Pricing of Options on Credit Default Swaps

@inproceedings{Schnbucher2003ANO,
  title={A Note on Survival Measures and the Pricing of Options on Credit Default Swaps},
  author={Philipp J. Sch{\"o}nbucher},
  year={2003}
}
In this note the pricing of options on credit default swaps using the survival-measure-pricing technique is discussed. In particular, we derive a modification of the famous Black (1976) futures pricing formula which applies to options on CDS, and show how other pricing formulae can be easily derived if the dynamics of the forward CDS rates are specified differently. The main tool in the derivation of the pricing formulae is to express prices and payoffs in terms of a defaultable numeraire asset… CONTINUE READING