For example, in recent years it has become common to look at the pricing of credit default swaps (CDS) to assess riskiness.
Based on the results obtained in the previous section, we derive the pricing of a default-free zero-coupon bond and a European put option on a zero-coupon bond.
As some applications in finance and insurance, the pricing of the default-free zero-coupon bond and the European put option on the zero-coupon bond, and the moments of the aggregate accumulated claim amounts are discussed.
3, by means of the results in the previous section, we discuss the financial application of the Vasicek model with mixed-exponential jumps, and derive the pricing of a default-free zero-coupon bond and a European put option on a zero-coupon bond.
Even in late 2008 and early 2009, by which point it should have been clear that the government wouldn't let big banks go under, the prices of credit default swaps (that is, insurance against default) for banks like Citigroup and Bank of America soared whenever investors' anxiety about the banks' financial health rose.
The price of credit default swaps to insure against GE bond defaults has soared from about 30 basis points a year ago to above 600 lately, according to research firm Markit, implying that investors think GE's bonds deserve a much lower rating.
The accounting adjustments are partly based on the prices of credit default swaps, derivatives contracts investors can buy to protect themselves against the default of a company.
Before the financial crisis took hold in 2008, the basis-point prices of credit default swaps on United States treasury notes — essentially, bets on a federal debt default — were generally in the single digits.
Not only did G.M.'s stock rise, but the price of credit default swaps for GMAC — which essentially allow an investor to buy insurance against a possible default on the debt — decreased.
CNN MONEY Credit Default Swaps Affect Goldman's "Emotions" | Goldman Sachs's chief financial officer, David A. Viniar, said it was "confusing" that prices of credit default swaps on the bank's debt have risen, reflecting a higher probability that the bank could default.
