descriptionPublicationkeyboard_double_arrow_right Article 01 Jan 2011Publisher:Scientific Research Publishing, Inc.Journal:Technology and Investment, volume 2, pages 240-246 (issn: 2150-4059, eissn: 2150-4067,

Authors: Jin Liang; Yujing Zhou;

doi: 10.4236/ti.2011.24025

Valuation of a Tranched Loan Credit Default Swap Index

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Abstract

This paper provides a methodology for valuing a Loan Credit Default Swap Index (LCDX) and its tranches involving both default and prepayment risks. The valuation is path dependence, where interest, default and prepayment rates are correlated stochastic processes following CIR processes. By Monte Carlo simulation, a numerical solution and team structure of tranched LCDX are obtained. Computing examples are provided.

Related Organizations

Tongji University
China (People's Republic of)

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