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Credit Risk Frontiers: Subprime Crisis, Pricing and Hedging, CVA, MBS, Ratings, and Liquidity
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Credit Risk Frontiers: Subprime Crisis, Pricing and Hedging, CVA, MBS, Ratings, and Liquidity

by Tomasz R. Bielecki, Damiano Brigo, Frédéric Patras
February 2011
Intermediate to advanced content levelIntermediate to advanced
768 pages
22h 39m
English
Bloomberg Press
Content preview from Credit Risk Frontiers: Subprime Crisis, Pricing and Hedging, CVA, MBS, Ratings, and Liquidity

Chapter 8

Options on Credit Default Swaps and Credit Default Indexes

Marek Rutkowski

School of Mathematics and Statistics, University of Sydney

We focus on derivations of valuation formulas and hedging strategies for credit default swaptions and credit default index swaptions. Most results presented in this chapter are independent of a particular convention regarding the specification of fee and protection legs, so that they can also be applied to valuation of other credit derivatives that exhibit similar features as credit default swaptions, for instance, options on CDO tranches. The main tool is a judicious choice of the reference filtration combined with a suitable specification of the risk-neutral dynamics for the predefault (loss-adjusted) ...

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Publisher Resources

ISBN: 9781118003831Purchase book