LibraryPhysical Science & MathMathematics

Modeling Credit Risk and Pricing Credit Derivatives

by Martin P. Wolf

e-Book PDF
Institution: University of Innsbruck
Advisor(s): Walter Schwaiger
Degree: Magister, Mathematical Finance
Year: 2002
Volume: 139 pages
ISBN-10: 1581121458
ISBN-13: 9781581121452


The thesis starts with a short description of the credit derivatives' place in the credit risk management. Then it proceeds by outlining the basic forms of credit derivatives, their applications, and their contract elements. A short description of the two common pricing frameworks for credit derivatives, the Firm's Value Models and the Credit Rating Transition Models is given.

The major approach reviewed in this thesis is the one of Duffie-Singleton for valuing credit derivatives with term structure models. This framework is also applied in a simulation and examines the importance of the different parameters on the outcome. Also examples for the valuation of Default Digital Swaps and Puts as well as Credit Default Swaps and Puts are given.