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A Markov Copula Model of Portfolio Credit Risk with Stochastic Intensities and Random Recoveries


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Title: A Markov Copula Model of Portfolio Credit Risk with Stochastic Intensities and Random Recoveries
Authors: Bielecki, Tomasz R.
Cousin, Areski
Crépey, Stéphane
Herbertsson, Alexander
Issue Date: Oct-2012
Extent: 21 pages
Publication type: report
Organization: Dept of Economics, University of Gothenburg
Series/Report no.: Working Papers in Economics
545
Keywords: portfolio credit risk
Markov Copula model
common shocks
stochastic spreads
random recoveries
Abstract: In [4], the authors introduced a Markov copula model of portfolio credit risk. This model solves the top-down versus bottom-up puzzle in achieving efficient joint calibration to single-name CDS and to multi-name CDO tranches data. In [4], we studied a general model, that allows for stochastic default intensities and for random recoveries, and we conducted empirical study of our model using both deterministic and stochastic default intensities, as well as deterministic and random recoveries onl... more
ISSN: 1403-2465
URI: http://hdl.handle.net/2077/30657
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