Valuation of a Tranched Loan Credit Default Swap Index
Jin Liang, Yujing Zhou
DOI: 10.4236/ti.2011.24025   PDF    HTML     6,491 Downloads   10,382 Views   Citations


This paper provides a methodology for valuing a Loan Credit Default Swap Index (LCDX) and its tranches involving both default and prepayment risks. The valuation is path dependence, where interest, default and prepayment rates are correlated stochastic processes following CIR processes. By Monte Carlo simulation, a numerical solution and team structure of tranched LCDX are obtained. Computing examples are provided.

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J. Liang and Y. Zhou, "Valuation of a Tranched Loan Credit Default Swap Index," Technology and Investment, Vol. 2 No. 4, 2011, pp. 240-246. doi: 10.4236/ti.2011.24025.

Conflicts of Interest

The authors declare no conflicts of interest.


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