Identifier

etd-011312-121903

Abstract

This project discusses the intensity and survival probability derived from Credit Default Swaps (CDS). We utilize two models, the reduced intensity model and the Shift Square Root Diffusion (SSRD) model. In the reduced intensity model, we assume a deterministic intensity and implement a computer simulation to derive the survival probability and intensity from the CDS market quotes of the company. In the SSRD model, the interest rate and intensity are both stochastic and correlated. We discuss the impaction of correlation on the interest rate and intensity. We also conduct a Monte Carlo simulation to determine the dynamics of stochastic interest rate and intensity.

Publisher

Worcester Polytechnic Institute

Degree Name

MS

Department

Mathematical Sciences

Project Type

Thesis

Date Accepted

2012-01-13

Accessibility

Unrestricted

Subjects

survival probability, Credit Default Swaps

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