The Pricing Of Defaultable Securities With Counterparty Risk

As we all know, the pricing method is the core of modern financial theory.Manu- facturers will bankrupt if they make mistakes in pricing their financial products, because this will influence the financial products'issue and trade. There are many me- thods for pricing firms'bonds, such as pricing it according to the market price, etc. Every country, especially the developing countries pay great attention to the problem of financial risk since the Southeast Asia financial crisis. With the developing of econ- omy and the completing of the market, the research of derivative in the financial mar- ket is improved. It can help the investor to make right decision if the problems of pri- cing and hedging derivative are solved.The whole thesis consists of five chapters. In chapter one: firstly, we discuss the history and the development of defaultable bonds'pricing and the present conditions. Then we discuss the problem which will be solved. In the following chapter two, we discuss the basic three factors in modeling and construction of default processes. The main work is in chapter three and chapter four.In chapter three, we mainly concern with pricing problem of defaultable bonds if there are correlated default risk ,under these default is independent of the default-free term structure. We use Copula function to describe the relation of different counter- parties'default time, and then give the pricing functions of the bonds.In chapter four: we mainly consider pricing problem of defaultable bonds when default is correlated with the default-free term structure. We consider the pricing of the bonds when there are multi counterparties.In chapter five: we conclude the paper and give some problems which need to be discussed in the future.