Credit Arbitrage Model of Swaps

摘要

Swap market is one of most rapidly growing financial product markets. However, the profit allocation system of swaps in the international world is far from sound and the flow of arbitrage with swaps has not been theorized. Therefore, this paper has designed a sound program to allocate the profit between the parties to the swap, and has proposed a credit arbitrage model of swaps, which includes detailed process of arbitrage, sound profit allocating program, law of cost and forms of swaps. This paper has elaborated the model in the form of calculation. The clear steps and simple calculation method make it easy to seek solutions through equations. Finally, this paper has, through case-study, proved the practicability of the model and demonstrated that the company with a high credit rating can gain corresponding compensation by virtue of its credit advantage.