How can I build from a EUR CDS curve an USD CDS curve ? Any idea ? Thanks

QuoteOriginally posted by: jayjayHow can I build from a EUR CDS curve an USD CDS curve ? Any idea ? ThanksI think this topic is reasonably well covered in the literature. maybe in Schonbucher. Anyway, what you will need to do is compute risk neutral default probabilities relative to a Euro denominated numeraire. I am slopping around, and, as usual, I have some wine in me, but, you will effectively, mathematically, need to change measure from USD money market account to an EUR money market account (or, discount bond numeraire). Effectively, you will apply Girsonov or Radon Nikodym to change from USD to Euro. Financially, this means the effect of converting euros to dollars, dynamically hedging, and converting back. Without doing the calcs, your survival probabilities will probably be multiplied by exp(something) where something is a function of FX, possibly IR, and possibly default intensity correlations and vols. It shouldn't be difficult to work out mathematically.

QuoteOriginally posted by: jayjayHow can I build from a EUR CDS curve an USD CDS curve ? Any idea ? ThanksHere is the paper on Quanto Survival/spread curve.Good luck,

Hi together,I am interested in quanto adjust a foreign survival curve X_f(t,T) to turn into a domestic survival probability curve (say EUR): X(t,T). I found a nice article on the subject, written by Andersen in the book Credit Derivatives the definite guide.The approach is to multiply the survival probabilities with a fuction of FX assuming that we are given some deterministic volatiliy functions sigma_X(t,T) and sigma_M(t,T) where M isdefined the foreign domestic exchange rate to time T such that X and M follow a Brownian motion.My question is where can I get such volas and has someone already done such an adjustment? What are the numbers nowadays? Since the article is a bit old and I am assuming under changed volatilities they are pretty different.Thanks

Here is another link to another paper about pricing quanto CDS.http://papers.ssrn.com/sol3/papers.cfm? ... id=2184893

Hi @Yassine77, could you re-write the link to the paper?? http://papers.ssrn.com/sol3/papers.cfm? ... 84893:SSRN Abstract Database Search ResultsThe abstract you requested was not found. Please check your search criteria and try again.

Sorry, I didnt sent you the right link.I think this one is correct:http://mpra.ub.uni-muenchen.de/42781/1/ ... _42781.pdf