Counterparty risk valuation for CDS
Pricing of Securities
2008-12-10 v1 Probability
Abstract
The valuation of counterparty risk for single name credit derivatives requires the computa- tion of joint distributions of default times of two default-prone entities. For a Merton-type model, we derive some formulas for these joint distribu- tions. As an application, closed formulas for counterparty risk on a CDS or for a first-to-default swap on two underlyings are obtained.
Keywords
Cite
@article{arxiv.0807.0309,
title = {Counterparty risk valuation for CDS},
author = {Christophette Blanchet-Scalliet and Frédéric Patras},
journal= {arXiv preprint arXiv:0807.0309},
year = {2008}
}