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| Main Author: | |
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| Format: | Preprint |
| Published: |
2011
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| Subjects: | |
| Online Access: | https://arxiv.org/abs/1201.0111 |
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Table of Contents:
- CDS options allow investors to express a view on spread volatility and obtain a wider range of payoffs than are possible with vanilla CDS. We give a detailed exposition of different types of single-name CDS option, including options with upfront protection payment, recovery options and recovery swaps, and also presents a new formula for the index option. The emphasis is on using the Black-76 formula where possible and ensuring consistency within asset classes. In the framework shown here the `armageddon event' does not require special attention.