Modelling of spreads on CDS

Student: Kuklev Lev

Supervisor: Dmitriy Alexandrovich Kachalov

Faculty: International College of Economics and Finance

Educational Programme: Bachelor

Year of Graduation: 2014

<p>The main purpose of this work is understanding of main features of spreads on Credit Default Swap (CDS) including factors determining its value. There are two main approaches to valuation of spread considered: option based model and expected payments valuation. It is assumed that two methods can be merged, because these models consider different properties of CDS. Combined model is not a precise calculation of the spread value, but it gives major understanding of factors influencing its value. Linear regression is used to test the significance of factors and the signs of its' coefficients. As a result, the part of factors have significant and consistent effect, but several hypotheses have been rejected.</p>

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