JOURNAL ARTICLE

An Exact Structural Model for Evaluating Credit Default Swaps: Theory and Empirical Evidence.

  • Published In: Journal of Fixed Income, 2023, v. 32, n. 3. P. 20 1 of 3

  • Database: Business Source Ultimate 2 of 3

  • Authored By: Chen, Ren-Raw; Hsieh, Pei-Lin 3 of 3

Abstract

Using structural models for credit default swaps has been difficult. Existing models all adopt shortcuts as approximations. In this article, we provide an accurate and efficient solution to the price of the credit default swap. The main result is a Theorem in section 2. In an empirical study, we show how our model can properly capture credit default swap exposure to interest rate volatility and asset volatility. Furthermore, we apply the new model to study (1) the interactions among market, credit, and interest risks; (2) the consistency with the reduced-form credit risk models; and (3) implications to capital structure arbitrage. [ABSTRACT FROM AUTHOR]

Additional Information

  • Source:Journal of Fixed Income. 2023/01, Vol. 32, Issue 3, p20
  • Document Type:Article
  • Subject Area:Business and Management
  • Publication Date:2023
  • ISSN:1059-8596
  • DOI:10.3905/jfi.2022.1.149
  • Accession Number:167721071
  • Copyright Statement:Copyright of Journal of Fixed Income is the property of With Intelligence Limited and its content may not be copied or emailed to multiple sites without the copyright holder's express written permission. Additionally, content may not be used with any artificial intelligence tools or machine learning technologies. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

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