Term Structure Andapplication Of Default-able Bonds Under General Default Intensity

With the continuous development of financial markets, the impact ofthe credit in the market economy increasingly far-reaching, credit riskespecially the default risk issues may now have become a hot topic in thefield of financial research. Especially after the financial crisis, the creditrisk between banks has gradually been concern. In recent studies, risk ofinter-bank lending can’t be ignored, at the same time the subject matter ofthis interest rate derivatives pricing have changed.This paper studies the term structure of default-able zero-couponbonds and pricing problem of some related interest rate derivatives. Firstly,use CIR interest rate model to construct default-free bonds; then enlargethe default-free filtration and set default intensity which is determined bydefault time’s condition density to characterise default-able bonds, wecalculate the price of the zero-couple default-able bonds and show theexplicit expression; Then, this paper focus on the default-able Libor,characterise the default-able Libor and calculate it; Finally, using theaforementioned theory, we price the Forward Rate Agreement and Interest Rate Swaps which are two common interest rate derivatives and show theexplicit expressions.