VALORACIÓN DE CREDIT DEFAULT SWAPS (CDS): UNA APROXIMACIÓN CON EL MÉTODO MONTE CARLO.

This article presents a Credit Default Swap (CDS) assessment model for Colombian corporate bonds, based on reduced credit risk models and on the Monte Carlo simulation method where the underlying asset follows a stochastic Stopped Poisson process. This model is an interesting alternative for CDS assessment in countries where the corporate bond market shows low liquidity and the credit derivative market is incipient or does not exist, which is the case in Colombia. Applying this model leads to good results for CDS for investment-grade securities although it tends to overestimate the premiums on securities in the last level of degree of speculation. Furthermore, the conclusion is drawn that the sensitivity of the CDS premiums is high regarding the credit event occurrence rate and low regarding the recovery rate and the interest rate. Such results confirm those obtained from other empirical studies conducted in countries with a developed credit derivate market. [ABSTRACT FROM AUTHOR]