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- Title
Modeling Simultaneous Defaults: A Top-Down Approach.
- Authors
Kunisch, Michael; Uhrig-Homburg, Marliese
- Abstract
This article proposes a method of modelling default dependencies in the context of reduced-form models. Incorporating contagion effects in addition to the dependence on common state variables is the main idea of the proposed model. The model focuses on portfolios of companies rather than starting with a description of a default process for each companies. One of the advantages of the proposed model is the easiness in deriving formulas for defaultable claims. This model may also be applied to synthetic tranches of credit derivatives indices.
- Subjects
DEFAULT (Finance); DERIVATIVE securities; CREDIT derivatives; INVESTMENTS; BUSINESS enterprises; LEGAL claims
- Publication
Journal of Fixed Income, 2008, Vol 18, Issue 1, p25
- ISSN
1059-8596
- Publication type
Article
- DOI
10.3905/jfi.2008.708841