An exact formula for default swaptions' pricing in the SSRJD stochastic intensity model

Damiano Brigo and Naoufel El-Bachir ()
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Naoufel El-Bachir: ICMA Centre, University of Reading

ICMA Centre Discussion Papers in Finance from Henley Business School, University of Reading

Abstract: We develop and test a fast and accurate semi-analytical formula for single-name default swaptions in the context of the shifted square root jump diffusion (SSRJD) default intensity model. The formula consists of a decomposition of an option on a summation of survival probabilities in a summation of options on the underlying survival probabilities, where the strike for each option is adjusted.

Keywords: Credit derivatives; Credit Default Swap; Credit Default Swaption; Jump-diffusion; Stochastic intensity; Doubly stochastic poisson process; Cox process; Semi-Analytic formula; Numerical integration (search for similar items in EconPapers)
JEL-codes: C63 C65 G12 G13 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2007-11
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Citations: View citations in EconPapers (1)

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Working Paper: An exact formula for default swaptions' pricing in the SSRJD stochastic intensity model (2008)
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