Credit Risk Mitigation through CDSs: Evidence from the French Credit Derivative Market
Navick, Laura (2014) Credit Risk Mitigation through CDSs: Evidence from the French Credit Derivative Market. [Dissertation (University of Nottingham only)] (Unpublished)
This thesis provides four methodologies for estimating risk-neutral default probabilities. First, by using the Hull-White (2000) approach relying on bond prices. Secondly, by bootstrapping hazard rates from CDS spreads through the JP Morgan (1999) model, whilst assuming a piecewise constant hazard rate function. Thirdly, by applying Hull and White’s (2003) framework, while supposing a piecewise constant credit event probability density function. Finally, the hypothesis of a piecewise linear default probability distribution is examined instead. Additionally, this study will apply the Hull-White (2000) spread formula for the valuation process of CDSs and will thus offer an additional application to a theoretical framework that suffers from a lack of tangible data examples. This is operated in the case of the payoff being contingent on default by one reference entity only and an absence of counterparty default risk.
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