Basic purpose of a credit default swap (CDS) is to protect its buyer against a default of a reference entity. During the ongoing EMU debt crisis this purpose was questioned when Greek default was postponed continuously and actions of European public authorities gave rise to speculations that...

Basic purpose of a credit default swap (CDS) is to protect its buyer against a default of a reference entity. During the ongoing EMU debt crisis this purpose was questioned when Greek default was postponed continuously and actions of European public authorities gave rise to speculations that...

Basic purpose of a credit default swap (CDS) is to protect its buyer against a default of a reference entity. During the ongoing EMU debt crisis this purpose was questioned when Greek default was postponed continuously and actions of European public authorities gave rise to speculations that...

The credit crisis and the following sovereign debt crisis during 2007 and 2012 led to an increasing volatility of European corporate bond credit spreads. European investment grade credit spreads rose in 2007 and 2008 from 50 BP to over 350 BP. In the years after the credit spreads declined to...

The credit crisis and the following sovereign debt crisis during 2007 and 2012 led to an increasing volatility of European corporate bond credit spreads. European investment grade credit spreads rose in 2007 and 2008 from 50 BP to over 350 BP. In the years after the credit spreads declined to...

In this paper, we establish an intensity based multi-factor model to value LCDS. The pricing model incorporates the modeling of default, prepayment and recovery risks. Using one factor model, negative correlation between the default and prepayment intensities and positive correlation between the...