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A Theoretical Investigation into the Pricing of Credit Default Swaps: The Role of Reflexivity and the Impact of Asymmetry
Jönköping University, Jönköping International Business School.
Jönköping University, Jönköping International Business School.
2012 (English)Independent thesis Basic level (degree of Bachelor), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

Mathematical and quantitative sophistication provide financial institutions with scientific methods to price (over the counter) derivative products by the use of historical data and inputs. These inputs attempt to reflect the underlying reality within a company or economy quantitatively. This paper attempts to show how human perceptions based on input metrics that are used to help determine reality do not always offer reliable reflections of the underlying true picture. As a result of these misconceptions within derivative modelling we argue that risk managers must be able to overcome aspects of hidden risk in order to reduce large asymmetric losses within financial institutions.

Place, publisher, year, edition, pages
2012.
Keyword [en]
Asymmetry, Credit Ratings, Credit Risk, Default, Feedback, Efficient Market Hypothesis, Human Uncertainty Principle, Probability, Reducing Form Modelling, Reflexivity, Uncertainty
National Category
Economics
Identifiers
URN: urn:nbn:se:hj:diva-19517OAI: oai:DiVA.org:hj-19517DiVA: diva2:556483
Subject / course
IHH, Economics
Presentation
2012-09-14, B3051, 10:00 (English)
Uppsok
Social and Behavioural Science, Law
Supervisors
Examiners
Available from: 2012-10-17 Created: 2012-09-25 Last updated: 2012-10-17Bibliographically approved

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