Swap Rates and Credit Quality

Posted: 14 Sep 1999

See all articles by Darrell Duffie

Darrell Duffie

Stanford University - Graduate School of Business; National Bureau of Economic Research (NBER)

Ming Huang

Cornell University - Samuel Curtis Johnson Graduate School of Management

Date Written: August 1994

Abstract

The impact of credit quality on swap rates is determined under alternative netting assumptions. With counterparties of different default risk, swap valuation is non-linear in the underlying promised exchange of cash flows. The impact of credit risk asymmetry and of netting is presented through both theory and numerical examples, which include interest rate and currency swaps.

JEL Classification: G00

Suggested Citation

Duffie, James Darrell and Huang, Ming, Swap Rates and Credit Quality (August 1994 ). Available at SSRN: https://ssrn.com/abstract=5585

James Darrell Duffie (Contact Author)

Stanford University - Graduate School of Business ( email )

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National Bureau of Economic Research (NBER)

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Ming Huang

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Ithaca, NY 14853
United States
607-225-9594 (Phone)

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