Since 2014
CDS pricing using a Copula-Monte Carlo Approach
Journal of Research in Accounting and Management Sciences
View Archive Info| Field | Value | |
| Title |
CDS pricing using a Copula-Monte Carlo Approach
CDS pricing using a Copula-Monte Carlo Approach |
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| Creator |
García-Ruiz, Reyna Susana; Universidad Nacional Autónoma de México -UNAM-
López-Herrera, Francisco; Universidad Nacional Autónoma de México -UNAM- Cruz-Aké, Salvador; Instituto Politécnico Nacional -IPN- |
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| Subject |
CDS; Copula-Monte Carlo; default probabilities
G12; G17; G32 CDS; Copula-Monte Carlo; probabilidad de incumplimiento G12; G17; G32 |
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| Description |
This paper proposes a methodology, based on Copula, Monte Carlo, and Bootstrap methodologies, to price a CDS without using more data than the one provided by the financial statements. This means that our methodology could be suitable not only for firms listed in the exchange market but also for nonlisted firms, so the results shown on the paper could extend the possibility of pricing CDS. The propounded methodology links the default probabilities to some key variables which dependence structure is captured by a copula and recombine it for pricing the CDS. To test the validity of the proposed methodology, we used data from TV Azteca (a media Mexican Company with recent financial concerns) and we obtained a CDS spread similar to the default rate implied in its credit risk rating.
This paper proposes a methodology, based on Copula, Monte Carlo, and Bootstrap methodologies, to price a CDS without using more data than the one provided by the financial statements. This means that our methodology could be suitable not only for firms listed in the exchange market but also for nonlisted firms, so the results shown on the paper could extend the possibility of pricing CDS. The propounded methodology links the default probabilities to some key variables which dependence structure is captured by a copula and recombine it for pricing the CDS. To test the validity of the proposed methodology, we used data from TV Azteca (a media Mexican Company with recent financial concerns) and we obtained a CDS spread similar to the default rate implied in its credit risk rating. |
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| Publisher |
Universidad Michoacana de San Nicolás de Hidalgo - UMSNH
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| Contributor |
Universidad Nacional Autónoma de México -UNAM-
Universidad Nacional Autónoma de México -UNAM- |
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| Date |
2018-01-10
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| Type |
info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion — — |
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| Format |
application/pdf
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| Identifier |
http://ricca.umich.mx/index.php/ricca/article/view/50
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| Source |
Revista de investigación en ciencias contables y administrativas; Vol. 3, Núm. 1 (2017): julio-diciembre de 2017
Journal of Research in Accounting and Management Sciences; Vol. 3, Núm. 1 (2017): julio-diciembre de 2017 2448-606X |
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| Language |
eng
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| Relation |
http://ricca.umich.mx/index.php/ricca/article/view/50/50
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| Rights |
Copyright (c) 2018 Revista de investigación en ciencias contables y administrativas
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