An exact formula for default swaptions? pricing in the SSRJD stochastic intensity model
Abstract: We develop and test a fast and accurate semi-analytical formula for single-name default swaptions in the context of the shifted square root jump diffusion (SSRJD) default intensity model. The formula consists of a decomposition of an option on a summation of survival probabilities in a summation of options on the underlying survival probabilities, where the strike for each option is adjusted.
| Published on | 5 September 2011 |
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| Authors | Damiano Brigo, Naoufel El-Bachir |
| Series Reference | 2007-14 |