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 JMF  Vol.5 No.3 , August 2015
Credit Derivative Valuation and Parameter Estimation for Multi-Factor Affine CIR-Type Hazard Rate Model
Abstract: The purpose of this paper is to derive or determine the Credit Derivative, especially, the Credit Default Swap which is under the hazard rate (or default intensity) distributed as a multi-factor of the Cox, Ingersoll and Ross (CIR, 1985) models. It is crucial to know how default should be modelled for the valuation of credit derivatives. We are motivated by the idea that CIR term structure model, for example, must be effective for modelling hazard rate, and has some significant properties: mean-reversion and affine. We use South Africa (SA) credit spread market data on Defaultable bonds to estimate parameters associated with the stochastic single-factor hazard rate type CIR.
Cite this paper: Maboulou, A. and Mashele, H. (2015) Credit Derivative Valuation and Parameter Estimation for Multi-Factor Affine CIR-Type Hazard Rate Model. Journal of Mathematical Finance, 5, 273-285. doi: 10.4236/jmf.2015.53024.
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