On the Pricing of Credit Spread Options: A Two Factor HW–BK Algorithm
On the Pricing of Credit Spread Options: A Two Factor HW–BK Algorithm
复制标题
信用利差期权定价：双因素 HW-BK 算法
DOI：
10.1142/s0219024903002031
复制
发表时间：
2003
期刊：
影响因子：
--
通讯作者：
R. C. Garcia
中科院分区：
文献类型：
--
作者：
J. Garcia;Helmut van Ginderen;R. C. Garcia
本文描述了什么是信用价差期权（CSO），并给出了一个定价的树算法，我们选择的树算法是一个两因子模型，其中一个因子是利率过程的船体和白色（HW），一个因子是违约强度的Black-Karazinsky（BK）。与Schonbucher（1999）的树模型相反，强度过程不能变为负值.以无风险收益率曲线和市场隐含违约概率曲线为输入，通过构造模型，可以对相关的可违约债券进行正确定价。然后，我们使用市场数据来校准模型，以定价在货币（ATM）CSO呼叫，然后测试它的价格出的钱（OTM）CSO呼叫CDS。此外，本文件的讨论还表明，金融机构在实际中对这些工具按市价计价时面临着困难和挑战。
In this article we describe what a credit spread option (CSO) is and show a tree algorithm to price it. The tree algorithm we have opted for is a two factor model composed by a Hull and White (HW) one factor for the interest rate process and a Black-Karazinsky (BK) one factor for the default intensity. As opposed to the tree model of Schonbucher 1999 the intensity process cannot become negative. Having as input the risk free yield curve and market implied default probability curve the model by construction will price correctly the associated defaultable bond. We then use Market data to calibrate the model to price an at the money (ATM) CSO call and then test it to price an out of the money (OTM) Bermudan CSO call on a CDS. Furthermore the discussions in this paper show in practice the difficulties and challenges faced by financial institutions in marking to market those instruments.