A Correlation Bridge between Structural Models and Reduced Form Models for Multiname Credit Derivatives

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A Correlation Bridge between Structural Models and Reduced Form Models for Multiname Credit Derivatives

by Damiano Brigo of Banca IMI, and
Eymen Errais of Stanford University

June 3, 2005

Abstract: We derive a consistent way to price multiname credit derivatives. The methodology proposed is based on copulas function to model the joint distribution of default times. The copula correlation coefficient are provided from the structural model.

Keywords: Intensity models, structural models, Collateralized debt obligation, copulas.

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