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||5th September 2011|
|Authors||Damiano Brigo, Naoufel El-Bachir|