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Erschienen in:
2015 | OriginalPaper | Buchkapitel
Valuation under a Standard Model
verfasst von : Fabio Bassan, Carlo D. Mottura
Erschienen in: From Saviour to Guarantor
Verlag: Palgrave Macmillan UK
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The reference guarantee contract — Upon execution of the reference contract, the guarantor agrees to pay a pre-established amount of money in case of the default of the borrower before the contract’s maturity provided that at the moment when the borrower defaults, the guarantor itself has not defaulted. The contract assumptions are: maturities of 1, 3, 5, 10 or 30 years; the guaranteed liability has a face value of €100; and a recovery rate, if the guarantee is enforced, of 40%. It is also assumed that the amount generated by the guarantee (€60) is paid upon the debtor’s default.