search query: @indexterm Credit / total: 493
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| Author: | Schmid, B. Kalemanova, A. |
| Title: | Applying a three-factor defaultable term structure model to the pricing of credit default options |
| Journal: | International Review of Financial Analysis
2002 : VOL. 11:2, p. 139-158 |
| Index terms: | MODELS PRICING PRICES CREDIT OPTIONS |
| Language: | eng |
| Abstract: | The authors of the article show how to price (digital) credit default options and swaps based on a three-factor defaultable term structure model. Basically, the authors need three pieces of information: the actual nondefaultable, the defaultable, and the zero-recovery defaultable term structure. The first two pieces can be easily obtained from observable market data using, e.g., the Nelson-Siegel methodology, the latter can be inferred from the other two. The authors also illustrate the whole pricing process, from model specification and parameter estimation to the actual credit derivatives pricing. The paper provides a substantial list of references on this subject. |
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