This study combines the empirical estimation of a Double-Exponential Jump-Diffusion (DEJD) process for a CDS index and the use of estimated parameters to price options on the index. In the first step we find Maximum Likelihood estimates for the diffusion volatility, the Poisson jump frequencies,...

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...