CMCDS valuation with market models

There is little, if any, literature available on constant-maturity credit default swap (CDS) valuation. Here, Damiano Brigo builds on his no-arbitrage dynamic CDS market model to derive a formula involving a 'convexity adjustment' feature correction, involving volatilities and correlations of approximated CDS spreads

In this article, we aim to derive an approximated no-arbitrage market valuation formula for constant-maturity credit default swaps (CMCDSs). This is a progression from the CDS options market model in Brigo (2005).

We begin by sketching some of the most interesting financial features of CMCDSs, and then we formally define CMCDSs. We briefly introduce CDS forward rates, and give the main result of the article - the approximated pricing formula - in terms of CDS forward rates and of their

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