Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/203135 
Authors: 
Year of Publication: 
2017
Publisher: 
FinPricing, Toronto
Abstract: 
This paper presents an analytical model for valuing interest rate swaps, subject to bilateral counterparty credit risk. The counterparty defaults are modeled by the reduced-form model as the first jump of a time-inhomogeneous Poisson process. All quantities modeled are market-observable. The closed-form solution gives us a better understanding of the impact of the credit asymmetry on swap value, credit value adjustment, swap rate and swap spread.
Subjects: 
defaultable interest rate swap
bilateral defaultable claim
credit asymmetry
market models
Black model
LIBOR market model
reduced-form model
credit value adjustment
swap spread
JEL: 
E44
G21
G12
G24
G32
G33
G18
G28
Document Type: 
Working Paper

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