arXiv Open Access 2016

Dependent Defaults and Losses with Factor Copula Models

Damien Ackerer Thibault Vatter

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Abstrak

We present a class of flexible and tractable static factor models for the term structure of joint default probabilities, the factor copula models. These high-dimensional models remain parsimonious with pair-copula constructions, and nest many standard models as special cases. The loss distribution of a portfolio of contingent claims can be exactly and efficiently computed when individual losses are discretely supported on a finite grid. Numerical examples study the key features affecting the loss distribution and multi-name credit derivatives prices. An empirical exercise illustrates the flexibility of our approach by fitting credit index tranche prices.

Topik & Kata Kunci

q-fin.MF q-fin.CP q-fin.PR

Penulis (2)

Damien Ackerer

Thibault Vatter

Format Sitasi

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Ackerer, D., Vatter, T. (2016). Dependent Defaults and Losses with Factor Copula Models. https://arxiv.org/abs/1610.03050

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Informasi Jurnal

Tahun Terbit: 2016
Bahasa: en
Sumber Database: arXiv
Akses: Open Access ✓