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BSWithJump Model And Pricing Of Quanto CDS With FX Devaluation Risk

EL-Mohammadi, Rachid (2009): BSWithJump Model And Pricing Of Quanto CDS With FX Devaluation Risk.

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Abstract

We present a new model for pricing quanto CDS where the FX could be strongly dependent on the credit reference. The model assumes lognormal hazard rate and deterministic FX local volatility where the FX spot can jump at time of default of the credit reference. We present the model, the calibration algorithm, and the quanto CDS pricing.

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