On pricing and hedging basket credit derivatives with dependent structure

Dong-Mei Zhu,Yue Xie,Wai-Ki Ching,Harry Zheng

CIFEr（2014）

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摘要

In this paper, we study the problem of hedging a basket credit derivatives, in particular, we are interested in basket default swaps. For the pricing of credit derivatives, we consider a factor Copula approach. Single-name credit default swaps will be chosen as the hedging instruments. The hedging mechanism is tested using simulated data with a given measure. Numerical results reveal the efficiency of our proposed hedging method.

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关键词

copula approach,credit transactions,hedging instruments,hedging mechanism,basket credit derivative hedging,basket credit derivative pricing,gaussian processes,pricing,single-name credit default swaps,economic indicators,correlation,mathematical model

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