We present a Monte Carlo valuation of iTraxx IG index tranches, combining structural and reduced-form models. The aim is to find tranche fair values, taking into account full term structures and actual correlations between individual firms.For 125 firms in the index, 1, 3 and 5-year CDS are used...

In this paper, we decompose credit default swap (CDS) spreads into a transitory component and a persistent component and test how these components are affected by the theoretical explanatory variables. We find significant but differing impacts of these explanatory variables on the extracted...

The objectives are to discern how the three financial sectors' CDS spreads interrelate to each other and with three other risks under the full sample and two subperiods: The 2007 Great Recession, and the 2009 recovery, and to assess the impact of QE1 on those risks in the second subperiod. The...