Credit Value Adjustment for Credit Default Swaps via the Structural Default Model

@inproceedings{Lipton2009CreditVA,
  title={Credit Value Adjustment for Credit Default Swaps via the Structural Default Model},
  author={Alexander Lipton and Artur Sepp},
  year={2009}
}
We propose a structural default model to evaluate the counterparty risk by trading in credit default swap (CDS) contracts. We model the joint evolution of the firm value of the entity underlying the CDS contract and the counterparty using a correlated jump-diffusion process. Unlike the reduced-form default model, where the default event is always a sudden event, in our model, the default event is triggered by a sudden drop in the value of the credit entity and subsequent deterioration of its… CONTINUE READING

Similar Papers

Citations

Publications citing this paper.
SHOWING 1-10 OF 40 CITATIONS