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How well do classical credit risk pricing models fit swap transaction data?
Author(s) -
Cossin Didier,
Pirotte Hugues
Publication year - 1998
Publication title -
european financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.311
H-Index - 64
eISSN - 1468-036X
pISSN - 1354-7798
DOI - 10.1111/1468-036x.00054
Subject(s) - swap (finance) , credit risk , database transaction , econometrics , transaction data , business , financial economics , economics , computer science , actuarial science , database , finance
Currency and interest rate swaps are subject to a complex, two‐sided default risk. Several theoretical papers have recently addressed the problem of pricing this swap credit risk. We implement a recent credit risk pricing model in an attempt to evaluate one of the main lines of research in theoretical credit risk analysis. We compare the model's analytical results to actual transaction data thanks to a unique academic database on swap transaction data.