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Credit Risk Derivatives

Name: Credit Risk Derivatives
Creator: Sanjiv Ranjan Das
Keywords: 0502 economics and business, 05 social sciences, 8. Economic growth, 1. No poverty

descriptionPublicationkeyboard_double_arrow_right Part of book or chapter of book , Article 28 Feb 1995Publisher:World Scientific Publishing CompanyJournal:The Journal of Derivatives, volume 2, pages 7-23 (issn: 1074-1240, eissn: 2168-8524,

Authors: Sanjiv Ranjan Das;

doi: 10.1142/9789814759601_0014 , 10.3905/jod.1995.407914

Credit Risk Derivatives

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Abstract

This article models the pricing of derivatives on credit risk, instruments proposed in 1992 by the International Swap Dealers Association that have started attracting market attention. The exact structure of the instruments continues to evolve today. We develop a framework to understand the key features of this class of products. It is shown that the price of the credit risk option is the expected forward value of a put option on a risky bond with a credit level-adjusted exercise price. Stripping of credit risk from the total risk of the bond is enabled by employing a stochastic strike price for the credit risk option. The article provides a framework for trading and hedging credit risk.

Related Organizations

Harvard University
United States

Impact byBIP!

	citations This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).	52
	popularity This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.	Top 10%
	influence This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).	Top 10%
	impulse This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.	Average