武蔵大学論集 「The Journal of Musashi University」 >
2022年度・第70巻 第2・3・4号 >
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http://hdl.handle.net/11149/2471
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Title: | Toward a unified model of sovereign quanto CDS spreads and government bond yields |
Authors: | KAGRAOKA, Yusho 神楽岡, 優昌 |
Keywords: | sovereign quanto credit default swap (CDS) spreads government bond yields default intensity risk-free interest rates correlation fractional step methods |
Issue Date: | 24-Mar-2023 |
Publisher: | 武蔵大学経済学会 |
Abstract: | A unified model that consistently evaluates sovereign quanto credit default swap (CDS) and government bonds is developed. By product, a new procedure is proposed to calibrate stochastic processes of the risk-free interest rate and the sovereign default intensity to sovereign quanto CDS spreads and government bond yields. Fractional step methods are applied to solve partial differential equations for CDS spreads and bond yields, which cannot be solved using a standard finite difference method due to a cross derivative term. An empirical study is conducted on United States, German and Portuguese quanto CDS spreads during the European sovereign debt crisis. The stochastic processes of the riskfree interest rates in USD and Euros and the default intensities of United States, German and Portuguese are simultaneously estimated and reveals that sovereign quanto CDS spread differentials are partially explained by introducing a correlation between the risk-free interest rate and the sovereign default intensity. Numerical analysis shows that the larger correlation between them leads to the smaller CDS spread. |
Description: | 論文 Articles JEL classifications: G12, G13, G15 |
URI: | http://hdl.handle.net/11149/2471 |
Appears in Collections: | 2022年度・第70巻 第2・3・4号
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