信用违约交换.PPT

計算保費的原理 Continuous time model 計算保費的原理 Continuous time model According to Stone-Weierstress theorem V(0.) can be uniformly approximated as close as a polynomial function on a compact interval. The hazard rate trend is not pronounced and the value is usually smaller than 0.05. This implies that the higher degree of polynomial has not significant impact on value of function. Thus we suggest setting λ(.) to be affine function or even constant function on each subinterval for projected period. Furthermore we assume that hazard rate function is piecewise constant. In order to match the setting of hazard rate, we also assume that the instantaneous forward rates are piecewise constant. 計算保費的原理 Continuous time model 計算保費的原理 Continuous time model 計算保費的原理 Continuous time model 計算保費的原理 Continuous time model 計算保費的原理 Continuous time model 計算保費的原理 Continuous time model The hazard rate term structure is regard as the risk factors which reflect PL, analogous to the stock price is a factor causing the fluctuations in stock. Despite a contract is endowed with several influencing factors, it is customary for a trader to make each contract effected by single risk factor. The traders replace hazard rate term structure with the average hazard rate. However, the practice quotes the spread (or premium) available on the CDS market. Thus trader converts the spread into the implied hazard as a basis for pricing. 計算保費的原理 Continuous time model In order to facilitate the market liquidity, the available on the standard CDS market only 500bp and 100bp two coupon for contract. Consider a standard CDS contract that coupon is c and the protection schedule as follows . The cost (or market value) for the contract is defined by Default Leg minus Premium Leg How do we define the Default Leg and Premium Leg for standard CDS contract? 計算保費的原理 Continuous time model 計算保費的原理 Continuous time model 計算保費的原理 Continuous time model 計算保費的原理 Continuous time model 計算保費