Credit Default Links The Pricing Of The Bonds

Since 1990s, credit risk has been the most important risk among all risks the banking faces, which the bank constitutions and their supervision departments are most concerned with. The credit derivatives have been one of the financial tools for renovation recently, which has been a very important means for the management of credit risk in the banking.The modern risk theory mainly develops with the mathematical tools, such as the stochastic process, which provides theoretic bases and practical guidance for operation. The paper deals with credit derivatives—pricing on CDLN, the focus placed on the arrival of contract-breaking moment and its liquidation rates, with help of the classical Martingale and the theory of stochastic point process, aiming at making up for the deficiency in the credit market: Standardize the credit contract to transfer the credit danger.This paper discusses how to establish the model of CDLN and how to improve and price it based on the model of density with the details shown in the following:1. First the paper evaluates the CDLN based on the model of density and makes a probe into the prices of CDLN at any time, and raises the instant prices when it is in the process of contract-breaking moment with the density being(h_i) Poisson. 2. This paper gives the instant CDLN prices of the zero-interest stocks , assuming that the contract-breaking moment depends on the company's assets (V_t) and the definite liabilities (D) and if the liquidation rate is external variables.3. This paper deduces the prices of CDLN with definite liabilities and stochastic liabilities with the help of Martingale, based on the model of credit danger similar to Merton's(1974) respectively, assuming that the liquidation rate and contract-breaking moment both depend on the relative value between the company's assets (V_t) and the definiteliabilities.