Open Access
2014 Total Return Swap Valuation with Counterparty Risk and Interest Rate Risk
Anjiao Wang, Zhongxing Ye
Abstr. Appl. Anal. 2014(SI37): 1-12 (2014). DOI: 10.1155/2014/412890


We study the pricing of total return swap (TRS) under the contagion models with counterparty risk and the interest rate risk. We assume that interest rate follows Heath-Jarrow-Morton (HJM) forward interest rate model and obtain the Libor market interest rate. The cases where default is related to the interest rate and independent of interest rate are considered. Using the methods of change of measure and the “total hazard construction,” the joint default probabilities are obtained. Furthermore, we obtain the closed-form formulas of TRS under different contagion models, respectively.


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Anjiao Wang. Zhongxing Ye. "Total Return Swap Valuation with Counterparty Risk and Interest Rate Risk." Abstr. Appl. Anal. 2014 (SI37) 1 - 12, 2014.


Published: 2014
First available in Project Euclid: 6 October 2014

zbMATH: 07022343
MathSciNet: MR3216048
Digital Object Identifier: 10.1155/2014/412890

Rights: Copyright © 2014 Hindawi

Vol.2014 • No. SI37 • 2014
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