Pricing Of Credit Default Swap With A Hyperbolic Contagion Model

The topic of this paper is the pricing of credit default swap(CDS) with three assetshyperbolic contagion model under intensity framework. The main results in this thesisare:Firstly,a hyperbolic attenuation function is introduced to re?ect the correlateddefault intensities of three competitiors or copartners. In this model, When one partydefaults, The other two parties parties as time goes on, the effert will get smaller andsamller until it disappears. And the jiont distribution and marginal distribution ofdefaults times are derived by employing the change of measure.Secondly,we price the credit default swap using the three assets hyperbolic at-tenuation function.We assume that the company A holds high-yield bonds issued bythat company C, but company C maybe defaults and company A may have credit risk.In order to hedge the company C's default risk, A and B sign a CDS contract that A(protection buyer) gives B regular payment, In exchange, B promise that if the refer-ence assets default, he will compensate for the losses .Under some assumptions andthe principle of no arbitrage, we obtaion the analytic solution of swap rates.