DYNAMIC CREDIT SPREAD MODEL

Systems and methods for calculating a value of a credit hybrid. The value of the credit hybrid is determined based on a model of the forward hazard rate that is based on a stochastic differential equation that includes a jump term for the hazard rate. The jump term may be based on a non-negative function of the hazard rate and a Poisson process. In addition, the stochastic differential equation may include a drift term for the hazard rate and a Brownian motion term for the hazard rate. The value of the credit hybrid may be determined by calibrating the model using calibration data and then calculating the value of the credit hybrid using the calibrated model. Both the calibration and the valuation steps may utilize Monte Carlo simulations.