Credit default swap options which are better known by the term CDS Swaptions are useful instrument to trade future expectation of the credit worthiness of a reference entity in the option format. As the name suggest, they are similar to their interest rate counterparts, but differ in terms of knock out feature which makes the option worthless if the reference entity defaults before the option expiry. We review the standard European option pricing and suggest few alternatives from the Levy class models that provide tractable treatment for the jumps-enriched intensity processes in the credit markets.
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