The DOI matches its Crossref record; 10 of the 10 references it cites were found in a registry or an index.
On Default Correlation: A Copula Function Approach
Abstract
This article studies the problem of default correlation. It introduces a random variable called “time-until-default” to denote the survival time of each defaultable entity or financial instrument, and defines the default correlation between two credit risks as the correlation coefficient between their survival times. The author explains why a copula function approach should be used to specify the joint distribution of survival times after marginal distributions of survival times are derived from market information, such as risky bond prices or asset swap spreads. He shows that the current approach to default correlation through asset correlation is equivalent to using a normal copula function. Numerical examples illustrate the use of copula functions in the valuation of some credit derivatives, such as credit default swaps and first-to-default contracts.
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Citations
Cites
ON THE PRICING OF CORPORATE DEBT: THE RISK STRUCTURE OF INTEREST RATES*
Merton, R. C. (1974) · The Journal of Finance · doi:10.1111/j.1540-6261.1974.tb03058.x · Cited by 10,581
Nelsen, R. B. (1999) · Lecture Notes in Statistics · doi:10.1007/978-1-4757-3076-0 · Cited by 7,744
Cox, D. R., & Oakes, D. (2018) · Chapman & Hall/CRC eBooks · doi:10.1201/9781315137438 · Cited by 6,234
On the Pricing of Corporate Debt: The Risk Structure of Interest Rates
Merton, R. C. (1974) · The Journal of Finance · doi:10.2307/2978814 · Cited by 2,751
Modeling Term Structures of Defaultable Bonds
Duffie, D., & Singleton, K. J. (1999) · Review of Financial Studies · doi:10.1093/rfs/12.4.687 · Cited by 2,542
Lehmann, E. L. (1966) · The Annals of Mathematical Statistics · doi:10.1214/aoms/1177699260 · Cited by 1,510
Lehmann, E. L. (2012) · Selected Works of E. L. Lehmann · doi:10.1007/978-1-4614-1412-4_64 · Cited by 1,332
Understanding Relationships Using Copulas
Frees, E. W., & Valdez, E. A. (1998) · North American Actuarial Journal · doi:10.1080/10920277.1998.10595667 · Cited by 1,257
(1951) · Medical Entomology and Zoology · Cited by 426
Credit Risk and Risk Neutral Default Probabilities: Information About Rating Migrations and Defaults
Delianedis, G., & Geske, R. L. (2003) · SSRN Electronic Journal · doi:10.2139/ssrn.424301 · Cited by 204
Cited by
MODELLING ASYMMETRIC EXCHANGE RATE DEPENDENCE*
Patton, A. J. (2006) · International Economic Review · doi:10.1111/j.1468-2354.2006.00387.x · Cited by 2,112
Financial modeling on the cell broadband engine
Agarwal, V., Liu, L.-K., & Bader, D. A. (2008) · 2008 IEEE International Symposium on Parallel and Distributed Processing · doi:10.1109/ipdps.2008.4536320 · Cited by 29
Clarke, C. (2012) · Journal of Cultural Economy · doi:10.1080/17530350.2012.674964 · Cited by 26
Metadata
- Authors
- Li, D. X.
- Venue
- The Journal of Fixed Income
- Publisher
- Pageant Media US
- Published
- 2000-03-31
- Volume
- 9
- Issue
- 4
- Pages
- 43-54
- ISSN
- 1059-8596 (ISSN-L)
- 2168-8648
- OpenAlex
- W2282382832
- Cited by
- 1,257
- References
- 10
- FWCI
- 20.98
- Type
- journal article
- Language
- en
- Open access
- closed
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Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
