In this paper, we use a discrete time non-homogeneous semi-Markov model for the rating evolution of the credit quality of a firm C (see D'Amico, Janssen, and Manca Proceedings of the II international workshop in applied probablity, 2004a) and we determine the credit default swap spread for a contract between two parties, A and B that, respectively, sell and buy a protection about the failure of the firm C. We work both in the case of deterministic and stochastic recovery rate. We also highlight the link between credit risk and reliability theory. © Springer Science+Business Media, LLC 2007.
Valuing credit default swap in a non-homogeneous semi-Markovian rating based model / Guglielmo, D'Amico; Jacques, Janssen; Manca, Raimondo. - In: COMPUTATIONAL ECONOMICS. - ISSN 0927-7099. - STAMPA. - 29:2(2007), pp. 119-138. [10.1007/s10614-006-9080-0]
Valuing credit default swap in a non-homogeneous semi-Markovian rating based model
MANCA, Raimondo
2007
Abstract
In this paper, we use a discrete time non-homogeneous semi-Markov model for the rating evolution of the credit quality of a firm C (see D'Amico, Janssen, and Manca Proceedings of the II international workshop in applied probablity, 2004a) and we determine the credit default swap spread for a contract between two parties, A and B that, respectively, sell and buy a protection about the failure of the firm C. We work both in the case of deterministic and stochastic recovery rate. We also highlight the link between credit risk and reliability theory. © Springer Science+Business Media, LLC 2007.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
