Credit Derivatives Pricing Models

One size does not fit all. SciComp: Providing cutting-edge credit derivatives pricing models for over 20 years.

Ready-to-Use Solutions

CDS Pricer

The CDS Pricer employs an intensity-based framework to price a standard credit default swap contract with upfront payment and subsequent running coupons. A CDS Calibrator is included to extract the underlying piecewise constant hazard curve from standard CDS market quotes.

STCDO Pricing Engine

The STCDO Pricing Engine employs a Gaussian copula framework with stochastic recovery, semi-analytic method, including an internal CDS calibration to extract the hazard rates from CDS quotes and a CDO calibration to extract base correlations from a standard credit index (e.g., DJ Itraxx). The STCDO Pricing Engine prices standard credit index tranches.

Custom Developed Pricing Models

Unlike vendors that rely upon pre-built libraries or toolkits, SciComp’s Custom Developed Pricing Models are built to exact customer specifications using state of the art numerical methods and customer selected interfaces and have comprehensive documentation and a complete description of the model implementation. A source code licensing option is available.  Find out more.

SciFinance: Technology of Choice for In-house Model Development

SciFinance automatically generates efficient C/C++-family pricing model source code from high-level model specifications. With hundreds of customizable, composable, industry-proven examples to choose from and a robust, transparent modeling environment, users can easily and rapidly create bespoke models for all asset classes.  Find out more.

Credit derivatives pricing models

Industry standard credit derivative models include, but are not limited to: 

  • Reduced form models
    • Lognormal and local volatility + deterministic interest and hazard rates
    • Lognormal and local volatility + stochastic interest and hazard rates
    • Stochastic volatility + deterministic interest and hazard rates
  • Structural models

In addition: SciComp supports the implementation of any derivatives pricing model valued using systems of partial differential equations (PDEs), stochastic differential equations (SDEs), or analytic functions. Therefore users may define a nearly unlimited range of public-domain and proprietary models.

Credit derivatives pricing model calibration functions

SciComp customers may select from two types of solutions for model calibration: SciCalibrator, a module of SciFinance that helps users develop their own calibration functions; and Ready-to-Use Calibrators a suite of robust, ready-to-use, standalone calibration functions that can be tailored to meet customer requirements.

Credit derivatives contract types

The list of contract features below is representative of those available with SciComp solutions, but by no means exhaustive. For Custom Developed Pricing Models, customers can request any credit derivatives model features they wish.  SciFinance users can write specifications from scratch to develop completely customized models in-house, or edit existing examples to adjust payoffs, add new path dependencies and define a limitless array of exotic contract features.

  • Single name
    • Defaultable bonds/Options on defaultable bonds
    • CDS/CDS options
    • Credit linked notes
      • American/Bermudan exercise
      • Range accrual structure
    • Credit spread options
    • Exchange options
  • Basket structures
    • Nth to default options/swaps
    • Cash/Synthectic CDOs
    • CDO²
    • CLOs
    • Single-tranche CDOs (STCDO)

Credit Derivatives Pricing Models

Get more information on credit derivatives pricing models.