ABSTRACT In this paper, a flexible pricing model for Credit Contingent Interest Rate Swap (CCIRS) with credit rating migration is proposed, which is sensitive to stochastic interest rates and counterparty default risk. This is a new pricing model for CCIRS. The counterparty of the underlying interest rate swap (IRS) is considered to have a high and a low credit grade, and credit rating migration is modelled by the first attempt of the interest rate based on the structural framework. Furthermore, the default event for the underlying IRS is modelled using the reduced-form framework. The partial differential equation (PDE) satisfied by the value of CCIRS with credit rating migration is derived by analysing the cash flow of a CCIRS contract. Finally, the numerical results and parameter analysis, which are solved by using the alternating direction implicit (ADI) method, are discussed and the convergence rate of the numerical algorithm combined with a regular explicit scheme is also suggested.

中文翻译：

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信用评级迁移的信用或有利率互换估值

摘要 本文提出了一种对随机利率和交易对手违约风险敏感的具有信用评级迁移的信用或然利率互换（CCIRS）的灵活定价模型。这是 CCIRS 的新定价模型。基础利率互换（IRS）的交易对手被认为具有高低信用等级，信用评级迁移是基于结构框架的利率首次尝试建模。此外，基础 IRS 的默认事件是使用简化形式的框架建模的。通过分析CCIRS合约的现金流量，推导出CCIRS值满足信用评级迁移的偏微分方程(PDE)。最后是数值结果和参数分析，