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Credit Default Option
In finance, a default option, credit default swaption or credit default option is an option (finance), option to buy protection (payer option) or sell protection (receiver option) as a credit default swap on a specific reference credit with a specific maturity. The option is usually Option style, European, exercisable only at one date in the future at a specific strike price defined as a coupon on the credit default swap. Credit default options on single credits are extinguished upon default without any cashflows, other than the upfront premium paid by the buyer of the option. Therefore, buying a payer option is not a good protection against an actual default, only against a rise in the credit spread. This may explain why such options are very illiquid. They may also feature quite high implied volatilities, as shown by Damiano Brigo (2005). However options on credit indices such as iTraxx and Credit default swap index, CDX include any defaulted entities in the intrinsic value of t ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Finance
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of financial economics bridges the two). Finance activities take place in financial systems at various scopes, thus the field can be roughly divided into personal, corporate, and public finance. In a financial system, assets are bought, sold, or traded as financial instruments, such as currencies, loans, bonds, shares, stocks, options, futures, etc. Assets can also be banked, invested, and insured to maximize value and minimize loss. In practice, risks are always present in any financial action and entities. A broad range of subfields within finance exist due to its wide scope. Asset, money, risk and investment management aim to maximize value and minimize volatility. Financial analysis is viability, stability, and profitability asse ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Option (finance)
In finance, an option is a contract which conveys to its owner, the ''holder'', the right, but not the obligation, to buy or sell a specific quantity of an underlying asset or instrument at a specified strike price on or before a specified date, depending on the style of the option. Options are typically acquired by purchase, as a form of compensation, or as part of a complex financial transaction. Thus, they are also a form of asset and have a valuation that may depend on a complex relationship between underlying asset price, time until expiration, market volatility, the risk-free rate of interest, and the strike price of the option. Options may be traded between private parties in ''over-the-counter'' (OTC) transactions, or they may be exchange-traded in live, public markets in the form of standardized contracts. Definition and application An option is a contract that allows the holder the right to buy or sell an underlying asset or financial instrument at a specified strike ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Credit Default Swap
A credit default swap (CDS) is a financial swap agreement that the seller of the CDS will compensate the buyer in the event of a debt default (by the debtor) or other credit event. That is, the seller of the CDS insures the buyer against some reference asset defaulting. The buyer of the CDS makes a series of payments (the CDS "fee" or "spread") to the seller and, in exchange, may expect to receive a payoff if the asset defaults. In the event of default, the buyer of the credit default swap receives compensation (usually the face value of the loan), and the seller of the CDS takes possession of the defaulted loan or its market value in cash. However, anyone can purchase a CDS, even buyers who do not hold the loan instrument and who have no direct insurable interest in the loan (these are called "naked" CDSs). If there are more CDS contracts outstanding than bonds in existence, a protocol exists to hold a credit event auction. The payment received is often substantially less ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Option Style
In finance, the style or family of an option is the class into which the option falls, usually defined by the dates on which the option may be exercised. The vast majority of options are either European or American (style) options. These options—as well as others where the payoff is calculated similarly—are referred to as "vanilla options". Options where the payoff is calculated differently are categorized as "exotic options". Exotic options can pose challenging problems in valuation and hedging. American and European options The key difference between American and European options relates to when the options can be exercised: * A European option may be exercised only at the expiration date of the option, i.e. at a single pre-defined point in time. * An American option on the other hand may be exercised at any time before the expiration date. For both, the payoff—when it occurs—is given by * \max\, for a call option * \max\, for a put option where K is the strike pr ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Strike Price
In finance, the strike price (or exercise price) of an option is a fixed price at which the owner of the option can buy (in the case of a call), or sell (in the case of a put), the underlying security or commodity. The strike price may be set by reference to the spot price, which is the market price of the underlying security or commodity on the day an option is taken out. Alternatively, the strike price may be fixed at a discount or premium. The strike price is a key variable in a derivatives contract between two parties. Where the contract requires delivery of the underlying instrument, the trade will be at the strike price, regardless of the market price of the underlying instrument at that time. Moneyness Moneyness is the value of a financial contract if the contract settlement is financial. More specifically, it is the difference between the strike price of the option and the current trading price of its underlying security. In options trading, terms such as ''in-the-mone ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Damiano Brigo
Damiano Brigo (born Venice, Italy 1966) is an applied mathematician and Chair in Mathematical Finance at Imperial College London. He is known for research in filtering theory and mathematical finance. Main results Brigo started his work with the development, with Bernard Hanzon and Francois Le Gland (1998), of the projection filters, a family of approximate nonlinear filters based on the differential geometry approach to statistics, also related to information geometry. With Fabio Mercurio (2002–2003), he has shown how to construct stochastic differential equations consistent with mixture models, applying this to volatility smile modeling in the context of local volatility models. With Aurelien Alfonsi (2005), Brigo introduced new families of multivariate distributions in statistics through the periodic copula function concept. Since 2002, Brigo contributed to credit derivatives modeling and counterparty risk valuation, showing with Pallavicini and Torresetti (2007) ho ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
ITraxx
iTraxx (Thomson Reuters Eikon code 'ITRAXX'; Bloomberg code 'ITRX') is the brand name for the family of credit default swap index products covering regions of Europe, Australia, Japan and non-Japan Asia. Credit derivative indexes form a large sector of the overall credit derivative market. The indices are constructed on a set of rules with the overriding criterion being that of liquidity of the underlying credit default swaps (CDS). The group of indices was formed by the merger in 2004 of the Trac-X indices created by J.P. Morgan & Co. and Morgan Stanley and the iBoxx CDS indices created by Deutsche Bank, ABN Amro and IBoxx. History Credit default swap indices originated in 2001, as did synthetic credit indices, when J.P. Morgan launched the JECI and Hydi indices. Then Morgan Stanley's Credit desk (under Annabel Littlewood) launched Synthetic TRACERS. "The two banks subsequently merged their indices under the Trac-X name in 2003. In parallel, ABN AMRO and Deutsche Bank teamed ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Credit Default Swap Index
A credit default swap index is a credit derivative used to hedge credit risk or to take a position on a basket of credit entities. Unlike a credit default swap, which is an over the counter credit derivative, a credit default swap index is a completely standardized credit security and may therefore be more liquid and trade at a smaller bid–offer spread. This means that it can be cheaper to hedge a portfolio of credit default swaps or bonds with a CDS index than it would be to buy many single name CDS to achieve a similar effect. Credit-default swap indexes are benchmarks for protecting investors owning bonds against default, and traders use them to speculate on changes in credit quality. Issuance There are currently two main families of corporate CDS indices: CDX and iTraxx. CDX indices contain North American and Emerging Market companies and are administered by CDS Index Company (CDSIndexCo) and marketed by Markit Group Limited, and iTraxx indices contain companies from the ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Claus M
Claus (sometimes Clas) is both a given name and a German, Danish, and Dutch surname. Notable people with the name include: Given name *Claus Schenk Graf von Stauffenberg (1907–1944), a German officer who, along with others, attempted to assassinate Hitler in 1944 *Claus von Amsberg, Prince Claus of the Netherlands, Jonkheer van Amsberg (1926–2002) *Claus von Bülow (born 1926), British socialite accused of attempting to murder his wife, Sunny von Bülow *Claus Clausen (other), three people of that name *Claus Bech Jørgensen (born 1976), Danish-born Faroese footballer *Claus Jacob (born 1969), German scientist *Claus Jørgensen (racewalker) (born 1974), Danish race walker *Claus Larsen (other), three people of that name *Claus Lundekvam (born 1973), Norwegian former footballer *Claus Moser, Baron Moser (born 1922), British statistician *Claus Nielsen (born 1964), Danish former football striker *Claus Norreen (born 1970), Danish musician with the band Aqua, and r ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Option (finance)
In finance, an option is a contract which conveys to its owner, the ''holder'', the right, but not the obligation, to buy or sell a specific quantity of an underlying asset or instrument at a specified strike price on or before a specified date, depending on the style of the option. Options are typically acquired by purchase, as a form of compensation, or as part of a complex financial transaction. Thus, they are also a form of asset and have a valuation that may depend on a complex relationship between underlying asset price, time until expiration, market volatility, the risk-free rate of interest, and the strike price of the option. Options may be traded between private parties in ''over-the-counter'' (OTC) transactions, or they may be exchange-traded in live, public markets in the form of standardized contracts. Definition and application An option is a contract that allows the holder the right to buy or sell an underlying asset or financial instrument at a specified strike ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Credit Default Swap
A credit default swap (CDS) is a financial swap agreement that the seller of the CDS will compensate the buyer in the event of a debt default (by the debtor) or other credit event. That is, the seller of the CDS insures the buyer against some reference asset defaulting. The buyer of the CDS makes a series of payments (the CDS "fee" or "spread") to the seller and, in exchange, may expect to receive a payoff if the asset defaults. In the event of default, the buyer of the credit default swap receives compensation (usually the face value of the loan), and the seller of the CDS takes possession of the defaulted loan or its market value in cash. However, anyone can purchase a CDS, even buyers who do not hold the loan instrument and who have no direct insurable interest in the loan (these are called "naked" CDSs). If there are more CDS contracts outstanding than bonds in existence, a protocol exists to hold a credit event auction. The payment received is often substantially less ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Credit Derivative
In finance, a credit derivative refers to any one of "various instruments and techniques designed to separate and then transfer the ''credit risk''"The Economist ''Passing on the risks'' 2 November 1996 or the risk of an event of default of a corporate or sovereign borrower, transferring it to an entity other than the lender or debtholder. An unfunded credit derivative is one where credit protection is bought and sold between bilateral counterparties without the protection seller having to put up money upfront or at any given time during the life of the deal unless an event of default occurs. Usually these contracts are traded pursuant to an International Swaps and Derivatives Association (ISDA) master agreement. Most credit derivatives of this sort are credit default swaps. If the credit derivative is entered into by a financial institution or a special purpose vehicle (SPV) and payments under the credit derivative are funded using securitization techniques, such that a debt ob ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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