Cossin, Didier and Hugues Pirotte, "How Well do Classical Credit Risk Pricing Models Fit Swap Transaction Data?", European Financial Management, Vol. 4, No. 1, (March 1998), pp. 65-77.
Abstract: Currency and interest rate swaps are subject to a complex, two-sided default risk. Several theoretical papers have recently addressed the problem of pricing this swap credit risk. We implement a recent credit risk pricing model in an attempt to evaluate one of the main lines of research in theoretical credit risk analysis. We compare the model's analytical results to actual transaction data thanks to a unique academic database on swap transaction data.
Keywords: derivatives, swaps, credit risk, transaction data, model calibration.
The previous year, a longer version of essentially the same paper was published in another journal:
Cossin, Didier and Hugues Pirotte, "Swap Credit Risk: An empirical investigation on transaction data", Journal of Banking & Finance, Vol. 21, No. 10, (October 1997), pp. 1351-1373.
Abstract: Currency and interest rate swaps are subject to a complex, two-sided default risk. Although several theoretical papers have recently addressed the problem of pricing swap credit risk, the empirical literature is almost non-existent. This is the only study we know which uses actual transaction data to document the effect of credit risk on swap spreads. We provide results for both interest rate and currency swaps.
Keywords: Derivatives, Swaps, Credit risk, Empirical study.