Counterparty Risk and the Pricing of Defaultable Securities

Robert Jarrow () and Fan Yu

Journal of Finance, 2001, vol. 56, issue 5, 1765-1799

Abstract: Motivated by recent financial crises in East Asia and the United States where the downfall of a small number of firms had an economy‐wide impact, this paper generalizes existing reduced‐form models to include default intensities dependent on the default of a counterparty. In this model, firms have correlated defaults due not only to an exposure to common risk factors, but also to firm‐specific risks that are termed “counterparty risks.” Numerical examples illustrate the effect of counterparty risk on the pricing of defaultable bonds and credit derivatives such as default swaps.

Date: 2001
References: Add references at CitEc
Citations: View citations in EconPapers (261)

Downloads: (external link)
https://doi.org/10.1111/0022-1082.00389

Related works:
Chapter: Counterparty Risk and the Pricing of Defaultable Securities (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:56:y:2001:i:5:p:1765-1799

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().