Social and Behavioral Sciences Commons^™

Analysis Of Credit Risk And Single / Two Factor Model, Siwen Chen

Undergraduate Student Research Internships Conference

Since 2008, businesses and banks must manage and track more risk than ever before. Financial risk management helps companies and banks decrease the risk of investment and trade. Additionally, financial risk management gives a guide on how to forecast and manage the risk efficiently. More specifically, the three major risks are market risk, credit risk, and operational risk. This report will focus on the credit risk: introducing the definition of credit risk, single factor model, the relationship between coefficient and default probability, and the relationship of m coefficient and default probability. Using the single factor model, we will extend the …

The Effect Of Leverage On Credit Default Swaps, Xiling Lai

Undergraduate Student Research Internships Conference

The research investigates the effect of leverage on the pricing of Credit Default Swaps (CDS) and focuses on key sectors of the economy: Technology, Financials, Consumer Staples and Industrials. CDS are financial instruments that were developed a few decades ago and have become more widely used in financial markets for hedging credit exposures. Given their prevalence in financial markets, it is important to understand how CDS spreads change when reference entities modify their capital structure.

In the regression analysis, the level of CDS spread is used as dependent variable, and the standardized relative leverage is used as independent variable. My …