Total return swap valuation with counterparty risk and interest rate risk

DOI10.1155/2014/412890MaRDI QIDQ1724070zbMATH OpenOpenAlexWikidataFDO

Authors Anjiao Wang, Zhongxing Ye

Publication date 14 February 2019

Published in Abstract and Applied Analysis (Search for Journal in Brave)

Copyright license Creative Commons Attribution 3.0 Unported

Full work available at URL https://doi.org/10.1155/2014/412890

zbMATH Keywords

contagion modelscounterparty riskinterest rate risktotal return swap

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Interest rates, asset pricing, etc. (stochastic models) (91G30)

Review text

Summary: We study the pricing of total return swap (TRS) under the contagion models with counterparty risk and the interest rate risk. We assume that interest rate follows Heath-Jarrow-Morton (HJM) forward interest rate model and obtain the Libor market interest rate. The cases where default is related to the interest rate and independent of interest rate are considered. Using the methods of change of measure and the ``total hazard construction, the joint default probabilities are obtained. Furthermore, we obtain the closed-form formulas of TRS under different contagion models, respectively.

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Cited in

(4)

• The pricing of total return swap under default contagion models with jump-diffusion interest rate risk
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• scientific article; zbMATH DE number 6129240 (Why is no real title available?)
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