This paper discusses the pricing problem of credit default swap in the fractional Brownian motion environment. As credit default swap is exposed to both the interest rate risk and the default risk, we assume that the default intensity of a firm depends on the stochastic interest rate and the default states of counterparty firms. The interest rate risk is reflected by the fractional Vasicek interest rate model. We model the firm’s default intensity under the looping default model and derive the pricing formulas of risky bonds and credit default swap.
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R. Hao, Y. Liu and S. Wang, "Pricing Credit Default Swap under Fractional Vasicek Interest Rate Model," Journal of Mathematical Finance
, Vol. 4 No. 1, 2014, pp. 10-20. doi: 10.4236/jmf.2014.41002
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