# Credit default swap trading strategies

The utility maximization problem is solved using a Hamilton-Jacobi-Bellman equation and verification theorems are shown for its solution. We study the a portfolio optimization problem of a speculative investor allocating the wealth to an equity, a money market account and to a Credit Default Swap. Credit default swap trading strategies Enter search terms:

Explicit strategies are obtained for a logarithmic investor. The CDS has a continuous payment while the bond does not. Over the last 10 years, it has been observed that the credit markets and the equity markets are correlated. Also, we consider the correlation between the CDS and the equity.

To access this dissertation, please log in to our proxy server. Since we are considering CDS that are written on corporate bonds, we incorporate this market behavior by modeling the economy to exist in multiple regimes. Credit default swap trading strategies optimal strategies are obtained for an investor with a logarithmic utility function. Note that there is a significant difference in the reward structure of these two assets.

This regime is modeled by a nite state continuous Markov process. Under these assumptions, the dynamics of the CDS price are determined in terms of a stochastic differential equation. The CDS price dynamics is determined in terms of a Markov modulated stochastic differential equation and the Credit default swap trading strategies maximization problem is solved in the same way as above. Downloads Since November 24,

Skip to main content Purdue e-Pubs. The CDS price dynamics is determined in terms of a Markov modulated stochastic differential credit default swap trading strategies and the Utility maximization problem is solved in the same way as above. To incorporate this behavior, we model the default process as a doubly stochastic Poisson process where the default rate is a function of the stock price. Explicit optimal strategies are obtained for an investor with a logarithmic utility function.

This regime is modeled by a nite state continuous Markov process. Explicit optimal strategies are obtained for a logarithmic investor in a market that exists in 3 regimes. This work is differentiated from Capponi and Figueroa [] since they analyze a portfolio of an equity, money market account and a zero-coupon corporate bond. Since we are considering CDS that are written credit default swap trading strategies corporate bonds, we incorporate this market behavior by modeling the economy to exist in multiple regimes.

The CDS price dynamics is determined in terms of a Markov modulated stochastic differential equation and the Utility maximization problem is solved in the same way as above. Downloads Since November 24, Explicit strategies are obtained for a logarithmic investor.

The utility maximization problem is solved using a Hamilton-Jacobi-Bellman equation and verification theorems are shown for its solution. Note that there is a significant difference in the reward structure of these two assets. The CDS price dynamics is determined in terms of a Markov modulated stochastic credit default swap trading strategies equation and the Utility maximization problem is solved in the same way as above. Explicit optimal strategies are obtained for a logarithmic investor in a market that exists in 3 regimes. To access this dissertation, please log in to our proxy server.

Also, we consider the correlation between the CDS and the equity. The CDS price dynamics is determined in credit default swap trading strategies of a Markov modulated stochastic differential equation and the Utility maximization problem is solved in the same way as above. The market coefficients are assumed to depend on the regime in place. The primary difference is our consideration of a CDS instead of a defaultable bond.

This regime is modeled by a nite state continuous Markov process. Skip to main content Purdue e-Pubs. We see that the optimal investment in the CDS and stock are dependent on each other.