Research Of Pricing CDS Based On Numerical Method

With the development of global financial market and the research on credit risk, credit derivatives were born. The emergence of credit derivatives have changed the situation where financial institutions can only passively wait for the good results. Nowadays they can actively trade their credit risk just as the market risk. This paper mainly focuses on the pricing model of credit default swap. The author calculates the credit spread of CDS against Mediacom LLC by using Hull-White model. In this paper, the default intensity is firstly derived from the bond prices of Mediacom LLC by bootstrap method. Then it is applied to the pricing of the CDS. The author attempts to use theoretical calculation and numerical method in the pricing. The result shows that it gives a better result by adopting the numerical method. The goal of this paper is to offer some ideas for the future studies in CDS pricing.