CREDIT 

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Credit Default Swap:

The credit option uses a fixed default percentage model for the future default events and incorporates all payment costs. The Yield Curve building uses the liquid part of the money market curve, the relevant FRA’s and IMM instruments (mostly USD) and a set of swaps curves. The FRA and IMM instruments are favoured and so are the quoted IR swaps. The interpolation method is self-consistent interpolating all coupon payments according to the quoted interest rates. For details see website. There are three methods of interpolating for the Yield Curve and discount curve. There is no provision for a maturity volatility dependence or a volatility surface. This model can be created in the Excel add-in, or the model is represented as a set of C# files ready for compilation. There is no provision for a maturity volatility dependence, volatility surface or actual dividend payments. The model provides the bid / ask spread and shows the Greeks Delta, Gamma, Vega, Theta, ITM probability, strike dependence, and varies second derivatives like Volga, Veta and Vanna. There is no provision for a maturity volatility dependence or a volatility surface.

 

Credit Default Swap - Counterparty:

Includes the credit default swap model.

The credit option uses a fixed default percentage model for the future default events and incorporates all payment costs. In this model the counterparty and its correlation to the credit curve are included. The Yield Curve building uses the liquid part of the money market curve, the relevant FRA’s and IMM instruments (mostly USD) and a set of swaps curves. The FRA and IMM instruments are favoured and so are the quoted IR swaps. The interpolation method is self-consistent interpolating all coupon payments according to the quoted interest rates. There is no provision for a maturity volatility dependence or a volatility surface. This model can be created in the Excel add-in, or the model is represented as a set of C# files ready for compilation. There is no provision for a maturity volatility dependence, volatility surface or actual dividend payments. The model provides the bid / ask spread and shows the Greeks Delta, Gamma, Vega, Theta, ITM probability, strike dependence, and va

ries second derivatives like Volga, Veta and Vanna. There is no provision for a maturity volatility dependence or a volatility surface. For Equity Futures, there is also no provision for actual dividend payments (please see later models). Models like these can be applied to relatively short-dated options on Equity positions, equity structures or commodities.