Pricing Equity Default Swaps

• Main Authors: Yi-chun Liu, 劉怡君
• Other Authors: Jun-Biao Lin
• Format: Others
• Language: zh-TW
• Published: 2011
• Online Access: http://ndltd.ncl.edu.tw/handle/72486916981297457516

碩士 === 國立高雄第一科技大學 === 金融理財研究所 === 99 === In recent year, more and more attention have been paid to credit default risk. As a result the credit derivatives rapidly grow in volumes over the global market. Equity default swap (EDS) is one of the credit derivatives which first introduced in America in 2004. In this paper we incorporate the down-and-out call option concept to develop a pricing method for equity default swap, and compare with Merton (1976) jump diffusion model. Moreover, maximum-likelihood estimation(MLE) method introduced by Duan (2005) and EM algorithm introduced by Wong and Li (2006) is applied to estimate the parameters required for pricing. For test of the model, we analyzed the data based on companies from Nasdaq index. We compared the pricing result of EDS under these two models. On the other hand, we also offer some comparative analyses to factors used for pricing EDS. In empirical result we can find that the jump diffusion model is more available than DOC model. Volatility of asset, expectation of jump times, volatility of jump size and maturity is positive effect to EDS pricing in comparative analyses.