Research Of Credit Derivatives Products Pricing Based On Brownian Motion

The core of credit derivatives research is to determine the reasonable price. The pricing ofcredit default swaps and corporate bonds are the mainly aspects. Reasonableness of its pricingmodel directly afect the validity of the credit derivatives products the transferring risk. There-fore,credit derivatives pricing problem has a wide range of theoretical and practical significance.Based on brownian movement, the study focus on the vauation of credit default swap andcorporate bonds,as followsFirst,giving brief overview of derivatives,Brownian motion and the research status at homeand abroad of credit default swaps and corporate bonds.And then,discussing credit default swap pricing based on the difusion process, when the assetsvalue and the liabilities of the reference entity are driven by two diferent geometric Brownianmotion. Using the discretization method of Fortet and the no-arbitrage principle approach, theimplicit expression of the first time of default ofprobability and the price of credit default swap areobtained.Then,disscuss the valuation of the credit default swap in a jump difusion market. It is assumedthat the value of the company’s assets to obey a double exponential jump difusion process,whilethe default barrier follows a geometric Brownian motion.Through the method og the Gaver-Stehfest algorithm inversion, we give the first time ofthe default probability and ultimately use the method of risk-neutral pricing to obtain the priceformula of credit default swap.Finally, discussing the corporate bonds pricing under asymmetric information based on Mer-ton’s thoughts and the signal structure of Baglioni and Cherubini (2005). The pricing frameworkis built based on a difusion model and a lognormal jump difusion model. And then,the expressionof corporate interests, liabilities and credit spreads are given by using robabilistic methods andno-arbitrage principle.