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Contingent Claim Analysis


cca(equity, volatility, risk_free_rate, default_barrier, time_to_maturity, cds_spread)

Systemic risk based on contingent claims analysis (CCA).

The difference between put price and CDS price as a measure of firm's contribution to systemic risk based on Gray and Jobst (2010).

  • equity (float) the market value of the equity of the firm.
  • volatility (float) the volatility of equity.
  • risk_free_rate (float) the risk-free rate in annualized terms.
  • default_barrier (float) the face value of the outstandind debt at maturity.
  • time_to_maturity (float) the time to maturity of the debt.
  • cds_spread (float) the CDS spread for the firm.
Returns (Tuple[float, float])

A tuple of put price and the firm's contribution to the systemic risk indicator (put price - CDS put price).

>>> from frds.measures import cca
>>> cca(
...     equity=5,
...     volatility=1.2,
...     risk_free_rate=0.02,
...     default_barrier=10,
...     time_to_maturity=20,
...     cds_spread=1.5,
... )
(6.659378336338627, 3.3467523905471133)

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Last update: August 5, 2021
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