TY - JOUR A2 - Yu, Wenguang AU - Zhi, Kangquan AU - Guo, Jie AU - Qian, Xiaosong PY - 2020 DA - 2020/10/17 TI - Basket Credit Derivative Pricing in a Markov Chain Model with Interacting Intensities SP - 5369879 VL - 2020 AB - In this paper, we propose a Markov chain model to price basket credit default swap (BCDS) and basket credit-linked note (BCLN) with counterparty and contagion risks. Suppose that the default intensity processes of reference entities and the counterparty are driven by a common external shock as well as defaults of other names in the contracts. The stochastic intensity of the external shock is a Cox process with jumps. We derive recursive formulas for the joint distribution of default times and obtain closed-form premium rates for BCDS and BCLN. Numerical experiments are performed to show how the correlated default risks may affect the premium rates. SN - 1024-123X UR - https://doi.org/10.1155/2020/5369879 DO - 10.1155/2020/5369879 JF - Mathematical Problems in Engineering PB - Hindawi KW - ER -