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Python for Finance

You're reading from   Python for Finance Apply powerful finance models and quantitative analysis with Python

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Product type Paperback
Published in Jun 2017
Publisher
ISBN-13 9781787125698
Length 586 pages
Edition 2nd Edition
Languages
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Author (1):
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Yuxing Yan Yuxing Yan
Author Profile Icon Yuxing Yan
Yuxing Yan
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Toc

Table of Contents (17) Chapters Close

Preface 1. Python Basics FREE CHAPTER 2. Introduction to Python Modules 3. Time Value of Money 4. Sources of Data 5. Bond and Stock Valuation 6. Capital Asset Pricing Model 7. Multifactor Models and Performance Measures 8. Time-Series Analysis 9. Portfolio Theory 10. Options and Futures 11. Value at Risk 12. Monte Carlo Simulation 13. Credit Risk Analysis 14. Exotic Options 15. Volatility, Implied Volatility, ARCH, and GARCH Index

Credit default swap

A lender could buy a so-called credit default swap (CDS) to protect them in the event of default. The buyer of the CDS makes a series of payments to the seller and, in exchange, receives a payoff if the loan defaults. Let's see a simple example. A fund just bought $100 million corporate bonds with a maturity of 15 years. If the issuing firm does not default, the pension fund would enjoy interest payment every year plus $100 million at maturity. To protect their investment, they entered a 15-year CDS contract with a financial institution. Based on the credit worthiness of the bond issuing firm, the agreed spread is 80 basis points payable annually. This means that every year, the pension fund (CDS buyer) pays the financial institution (CDS seller) $80,000 per year over the next 10 years. If a credit event happens, the CDS seller would compensate the CDS buyer depending on their loss because of credit events. If the contract specifies a physical settlement, the CDS...

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