Valuing credit default swaps in uncertain environments

2018 2018 4th International Conference on Innovative Development of E-commerce and Logistics (ICIDEL 2018)   unpublished
The credit default swap is an important instrument in the financial market. At present, the valuation of credit default swaps is based on probability theory. In this paper, we propose a pricing formula for the credit default swap of corporate bonds from the perspective of a non-probabilistic method derived from uncertainty theory. In particular, we relate the corporate stock price to its solvency and use this relationship to develop the pricing formula. In addition, we derive two valuation
more » ... s for CDS under two classic uncertain stock models. The valuation models are then compared based on their properties.
doi:10.23977/icidel.2018.089 fatcat:h5vd7uhwqfaavlh6nutoo5o5oe