Business, Management and Accounting
8 years ago

New model predicts sudden firm defaults, revolutionizing credit risk control.

Systems Engineering
A Study on Pricing Model of Credit Default Swap Based on Jump-Diffusion Process
Jin Chen

Paper Summary

Credit default swaps are used to manage credit risk. A model was created to price them by simulating how a company's value changes over time. The model shows that a company can suddenly default if its value drops significantly.

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