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This paper mainly studies the pricing of credit default swap with the loan as the reference asset under the primary-secondary model. In the contract of credit default swap CDS, we consider that the defaults of the counterparties are correlated with the stochastic interest rate following Vasicek model or the default state of the reference firm. We assume that the company’s default is independent with the company’s prepayment and obtain the pricing formulas of the loan and loan CDS.

KEYWORDS

Loan CDS, Contagious Risk, Vasicek Interest Rate, Primary-Secondary Framework

Cite this paper

Liu, Y. , Hao, R. and Wang, Z. 2016 Pricing Loan CDS with Vasicek Interest Rate under the Contagious Model. Journal of Mathematical Finance, 6, 416-430. doi: 10.4236-jmf.2016.63033.





Autor: Yinglin Liu1, Ruili Hao2*, Zuhua Wang3

Fuente: http://www.scirp.org/



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