Recovery Swaps

Arthur M. Berd

Papers from arXiv.org

Abstract: We derive an arbitrage free relationship between recovery swap rates, digital default swap spreads and conventional CDS spreads, and argue that the fair forward recovery rate used in recovery swaps must contain a convexity premium over the expected recovery value.

Date: 2010-01
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Published in J. of Credit Risk, vol. 1(3), p. 61-70 (2005)

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