Introducing Fuzziness in CDS Pricing under a Structural Model
Joint Authors
Wu, Liang
Sun, Jian-guo
Mei, Xian-bin
Source
Mathematical Problems in Engineering
Issue
Vol. 2018, Issue 2018 (31 Dec. 2018), pp.1-7, 7 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2018-05-31
Country of Publication
Egypt
No. of Pages
7
Main Subjects
Abstract EN
OTC credit derivatives are nonstandardized financial derivatives which have the following characteristics.
(1) Information on trades is not public.
(2) There is no performance guarantee from the stock exchange.
(3) The bigger the risk in performance, the bigger the price floating.
These result in an asymmetry of market information flow and this asymmetry acts as a decisive factor in the credit risk pricing of financial instruments.
The asymmetry of market information flows will lead to obvious fuzziness in how counterparty risks are characterized, as in the process of valuing assets when discontinuous jumping takes place.
Accurately measuring the amplitude and frequency of asset values when influenced by information asymmetry cannot be arrived at just by analyzing the random values of historical data.
With this in mind, this paper hypothesizes both asset value jump amplitude and frequency of random parameters as a triangular fuzzy interval, i.e., a new double exponential jump diffusion model with fuzzy analysis.
It then gives a credit default swap pricing formula in the form of fuzziness.
Through the introduction of fuzzy information, this model has the advantage of being able to arrive at results in the form of triangular fuzziness and, consequently, being able to solve some inherent problems in a world characterized by asymmetry in the flow of market information and, to a certain extent, the inadequate disclosure of information.
American Psychological Association (APA)
Wu, Liang& Sun, Jian-guo& Mei, Xian-bin. 2018. Introducing Fuzziness in CDS Pricing under a Structural Model. Mathematical Problems in Engineering،Vol. 2018, no. 2018, pp.1-7.
https://search.emarefa.net/detail/BIM-1208350
Modern Language Association (MLA)
Wu, Liang…[et al.]. Introducing Fuzziness in CDS Pricing under a Structural Model. Mathematical Problems in Engineering No. 2018 (2018), pp.1-7.
https://search.emarefa.net/detail/BIM-1208350
American Medical Association (AMA)
Wu, Liang& Sun, Jian-guo& Mei, Xian-bin. Introducing Fuzziness in CDS Pricing under a Structural Model. Mathematical Problems in Engineering. 2018. Vol. 2018, no. 2018, pp.1-7.
https://search.emarefa.net/detail/BIM-1208350
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1208350