Credit Default Swap Markets and Credit Risk Pricing - A Comparative Study

This study focuses on the markets and pricing of credit default swaps. In order to understand various features of the instrument, different market venues are contrasted with their differentiating component, their liquidity. Structural and reduced-form models are brought into comparison in a way that their prediction power in pricing credit default swaps is tested. It is shown that simple and advanced forms of credit risk models perform similarly in reaching the fair price.