Economics, Econometrics and Finance
7 years ago

New model predicts credit default swaps, revolutionizing financial risk assessment.

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NHSMP Model for the Evaluation of Credit Default Swaps
Guglielmo D’Amico, Giuseppe Di Biase, Jacques Janssen, Raimondo Manca

Paper Summary

The article discusses how credit default swaps (CDSs) are evaluated using a non-homogeneous semi-Markov model. The researchers calculate the market value of the CDS contract over time, considering factors like recovery rates and firm reliability. They show how the price and value of the swap contract depend on these factors, using numerical examples to illustrate their findings.

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