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Pré-Publication, Document De Travail Année : 2019

The Valuation of Interest Rate Swap with Bilateral Counterparty Risk

Tim Xiao
  • Fonction : Auteur

Résumé

This paper presents an analytical model for valuing interest rate swaps, subject to bilateral counterparty credit risk. The counterparty defaults are modeled by the reduced-form model as the first jump of a time-inhomogeneous Poisson process. All quantities modeled are market-observable. The closed-form solution gives us a better understanding of the impact of the credit asymmetry on swap value, credit value adjustment, swap rate and swap spread.
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Dates et versions

hal-02169144 , version 1 (30-06-2019)

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  • HAL Id : hal-02169144 , version 1

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Tim Xiao. The Valuation of Interest Rate Swap with Bilateral Counterparty Risk. 2019. ⟨hal-02169144⟩
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