A Markov Chain Copula Model for Credit Default Swaps with Bilateral Counterparty Risk

doi:10.1080/03610926.2012.665555

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	A Markov Chain Copula Model for Credit Default Swaps with Bilateral Counterparty Risk
	Liang, Xue 1,2; Dong, Yinghui 1
刊名	COMMUNICATIONS IN STATISTICS-THEORY AND METHODS
	2014-02
卷号	43 期号:3 页码:498-514
关键词	Bilateral counterparty risk Credit default swaps Markov chain Markov copulae approach Unilateral counterparty risk
ISSN号	0361-0926
DOI	10.1080/03610926.2012.665555
英文摘要	Reduced-form credit risk models are widely used in pricing and hedging credit derivatives. Generating default dependency is the key element in any such model. In this article, we use Markov copulae approach to model the dependence structure of defaults between the three obligors, one is the reference entity, another is the protection seller, the other is the protection buyer(the investor), so we can consider the bilateral counterparty risk of credit default swaps(CDS). In this Markov chain copula model, we obtain the explicit formulas of the CDS premium rates C-1(T) (with unilateral counterparty risk) and C-2(T) (with bilateral counterparty risk). And then we perform some numerical experiments to analyze the difference of the fair spreads between the unilateral case and the bilateral case.
WOS研究方向	Mathematics
语种	英语
出版者	TAYLOR & FRANCIS INC
WOS记录号	WOS:000329777200004
内容类型	期刊论文
源URL	[http://10.2.47.112/handle/2XS4QKH4/1813]
专题	上海财经大学
通讯作者	Liang, Xue
作者单位	1.Suzhou Univ Sci & Technol, Sch Math & Phys, Suzhou 215009, Peoples R China; 2.Shanghai Univ Finance & Econ, Sch Stat & Management, Shanghai, Peoples R China
推荐引用方式 GB/T 7714	Liang, Xue,Dong, Yinghui. A Markov Chain Copula Model for Credit Default Swaps with Bilateral Counterparty Risk[J]. COMMUNICATIONS IN STATISTICS-THEORY AND METHODS,2014,43(3):498-514.
APA	Liang, Xue,&Dong, Yinghui.(2014).A Markov Chain Copula Model for Credit Default Swaps with Bilateral Counterparty Risk.COMMUNICATIONS IN STATISTICS-THEORY AND METHODS,43(3),498-514.
MLA	Liang, Xue,et al."A Markov Chain Copula Model for Credit Default Swaps with Bilateral Counterparty Risk".COMMUNICATIONS IN STATISTICS-THEORY AND METHODS 43.3(2014):498-514.