A simulation-based First-to-Default (FTD) Credit Default Swap (CDS) pricing approach under jump-diffusion

Authors:
Tarja Joro;Anne R. Niu;Paul Na
Affiliations:
University of Alberta School of Business, Edmonton, Alberta, Canada;University of Alberta School of Business, Edmonton, Alberta, Canada;Bayerische Landesbank New York Branch, New York, NY
Venue:
WSC '04 Proceedings of the 36th conference on Winter simulation
Year:
2004

Citing 2
Cited 2

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Abstract

In recent years, the credit derivatives market has grown explosively and credit derivatives have become popular tools for hedging credit risk of financial institutions. Among the more sophisticated credit derivatives are the ones where the contingent payoffs depend on the dependence relationship among several firms in a basket, such as First-to-Default Credit Default Swap. In this paper, we present a simulation-based First-to-Default Credit Derivative Swap pricing approach under jump-diffusion and compare it with the popular default-time approach via Copula.