CHINESE JOURNAL OF APPLIED PROBABILITY AND STATIST 2012, 28(3) 263-269 DOI:      ISSN: 1001-4268 CN: 31-1256

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The Fair Pricing of the Credit Default Swaps in a Intensity-Based Model Driven by Subordinator Processes

Hu Fengqing, Wang Guojing

Department of Mathematics and Center for Financial Engineering, Soochow University

Abstract��

For a reduced form model of credit risk,
we use Cox process whose intensity process is a subordinator process
to define the default time of the company. We derive closed forms of
the distribution of the company's default time. We also derive the
fair price of the defaultable zero coupon bond and the credit spread
of the credit default swaps.

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