Pricing Credit Derivatives in a 'Libor Market Model'

Diploma Thesis aus dem Jahr 2002 im Fachbereich Wirtschaft - Investition und Finanzierung, Note: 1,0, Rheinische Friedrich-Wilhelms-Universität Bonn (Institut für Gesellschafts- und Wirtschaftswissenschaften, Statistische Abteilung), 48 Eintragungen im Literaturverzeichnis, Sprache: Englisch, Anmerkungen: The growing importance of credit derivatives creates the need to price them in a market consistent manner. In this thesis the well known and accepted Libor Market Modelis extended following Schoenbucher (2000). The thesis consists of two main parts: one describing and explaining the theoretical framework that will yield the pricing formulae for credit derivatives, and a second part explaining how to practically implement and calibrate the model. , Abstract: The growing importance of credit derivatives creates the need to price them in a market consistent manner. In this thesis the well known and accepted Libor Market Model is extended following Schönbucher (2000). The thesis consists of two main parts: one describing and explaining the theoretical framework that will yield the pricing formulae for credit derivatives, and a second part explaining how to practically implement and calibrate the model. The second part also reports results of our implementation. We show that approximations introduced by Schönbucher (2000) hold and that the model can be used to price defaultable bonds, credit default swaps as well as options on credit default swaps.The thesis has been written at the Department of Statistics, University of Bonn in cooperation with Deutsche Postbank AG Credit Risk Management.