Engineering
8 years ago

New model reduces risks in credit default swaps, benefiting financial stability.

Study on Optimal Contracts Model of Credit Default Swap Based on Principal-agent Theory
Ying Zhang

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The article explores how to make credit default swap contracts better by looking at the problem of moral hazards. By using principal-agent theory, the researchers created a model to analyze these contracts and find the best features for them. They also came up with ways to reduce moral hazards and improve credit default contracts.