Author(s)

Yinglin Liu¹, Ruili Hao^2*, Zuhua Wang³

¹Faculty of Business and Economics, Macquarie University, Sydney, Australia.
²Department of Financial Mathematics, Shanghai Finance University, Shanghai, China.
³School of Mathematics, Shanghai University of Finance and Economics, Shanghai, China.

This paper mainly studies the pricing of credit default swap with the loan as the reference asset under the primary-secondary model. In the contract of credit default swap (CDS), we consider that the defaults of the counterparties are correlated with the stochastic interest rate following Vasicek model or the default state of the reference firm. We assume that the company’s default is independent with the company’s prepayment and obtain the pricing formulas of the loan and loan CDS.

Loan CDS, Contagious Risk, Vasicek Interest Rate, Primary-Secondary Framework

Liu, Y. , Hao, R. and Wang, Z. (2016) Pricing Loan CDS with Vasicek Interest Rate under the Contagious Model. Journal of Mathematical Finance, 6, 416-430. doi: 10.4236/jmf.2016.63033.