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Estimation of Sovereign Default Intensities and Sovereign Credit Default Swaps Valuation

Journal of Financial Studies

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Title Estimation of Sovereign Default Intensities and
Sovereign Credit Default Swaps Valuation
 
Creator Kehluh Wang
Meng-Nan Chen
 
Description We estimate the default intensities of sovereign entities from sovereign bonds by
simulated maximum likelihood estimation (SMLE). The estimated results are used to
price the sovereign credit default swaps and evaluate the pricing errors with the market
data. We find that credit default swaps are more sensitive to market information than
their reference obligations. As a result, for probable financial crisis in a country, credit
default swaps may overreact the risk and result in higher spreads.

Key words: Sovereign Credit Default Swap, Default Intensity, CIR Model, Simulated Likelihood Approximation
 
Publisher Journal of Financial Studies
財務金èžå­¸åˆŠ
 
Date 2011-05-27
 
Type —
 
Format application/pdf
 
Identifier http://www.jfs.org.tw/index.php/jfs/article/view/2011124
 
Source Journal of Financial Studies; Vol 16, No 4 (2008); 141
財務金èžå­¸åˆŠ; Vol 16, No 4 (2008); 141
 
Language —