دانلود مقاله ISI انگلیسی شماره 104044
کد مقاله سال انتشار مقاله انگلیسی ترجمه فارسی تعداد کلمات
104044 2017 35 صفحه PDF سفارش دهید 10472 کلمه
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عنوان انگلیسی
Pricing CDS spreads with Credit Valuation Adjustment using a mixture copula
منبع

Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)

Journal : Research in International Business and Finance, Volume 39, Part B, January 2017, Pages 963-975

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چکیده انگلیسی

Credit derivatives pricing models before Basel III ignored losses in market value stemming from higher probability of counterparty default. We propose a general credit derivatives pricing model to evaluate a Credit Default Swap (CDS) with counterparty risk, including the Credit Valuation Adjustment (CVA) in order to optimize the economic capital allocation. We work from the model proposed by Luciano (2003, Working Paper, International Center of Economic Research) and the general pricing representation established by Sorensen and Bollier (Financial Analysts Journal 1994;50(3):23–33) to provide a model close to the market practice, easy to implement and fitting with Basel III framework. We approach the dependence between counterparty risk and that of the reference entity with a technical tool: the copula, in particular, the mixture one that combines common “extreme” copulas. We study the CDS's vulnerability in extreme dependence cases. By varying Spearman's rho, the mixture copula covers a broad spectrum of dependence and ensures closed form prices. We end up with an application on real market data.

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