A note on replicating a CDS through a repo and an asset swap
Pricing of Securities
2013-05-02 v1
Abstract
In this note we show how to replicate a stylized CDS with a repurchase agreement and an asset swap. The latter must be designed in such a way that, on default of the issuer, it is terminated with a zero close-out amount. This break clause can be priced using the well known unilateral credit/debit valuation adjustment formulas.
Keywords
Cite
@article{arxiv.1305.0040,
title = {A note on replicating a CDS through a repo and an asset swap},
author = {Lorenzo Giada and Claudio Nordio},
journal= {arXiv preprint arXiv:1305.0040},
year = {2013}
}
Comments
6 pages, 1 figure, working paper