Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/203135
Authors: 
Xiao, Tim
Year of Publication: 
2017
Abstract: 
This paper presents an analytical model for valuing interest rate swaps, subject to bilateral counterparty credit risk. The counterparty defaults are modeled by the reduced-form model as the first jump of a time-inhomogeneous Poisson process. All quantities modeled are market-observable. The closed-form solution gives us a better understanding of the impact of the credit asymmetry on swap value, credit value adjustment, swap rate and swap spread.
Subjects: 
defaultable interest rate swap
bilateral defaultable claim
credit asymmetry
market models
Black model
LIBOR market model
reduced-form model
credit value adjustment
swap spread
JEL: 
E44
G21
G12
G24
G32
G33
G18
G28
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.