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Advanced Quantitative Finance with C++ by Alonso Peña Ph.D

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Chapter 7. Credit Derivatives with C++

In this last chapter, we focus on the application of C++ to the pricing of credit derivatives. We consider two examples: the use of the Merton model to price a defaultable firm's equity plus the firm's default probability (basic example) and the pricing of Credit Default Swap (CDS) (advanced example). The first example is based on the structural approach to credit risk, while the second is based on the intensity approach. We provide the full working C++ implementation for both the examples. A simpler C implementation (without the OO features) can be found in the accompanying book website.

Basic example – bankruptcy (CR1)

In this example, we will study the default (bankruptcy) of a firm using the (Merton 1974) ...

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