Pricing and Hedging Credit Derivatives with Copulas
AbstractIn this paper, we apply a copula function pricing technique to the evaluation of credit derivatives, namely a vulnerable default put option and a credit switch. Also in this case, copulas enable one to separate the specification of marginal default probabilities from their dependence structure. Their use is based here on no-arbitrage arguments, which provide pricing bounds and easy-to-implement super-replication strategies. Copyright Banca Monte dei Paschi di Siena SpA, 2003
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Bibliographic InfoArticle provided by Banca Monte dei Paschi di Siena SpA in its journal Economic Notes.
Volume (Year): 32 (2003)
Issue (Month): 2 (07)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0391-5026
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- Ahmedov, Zafarbek & Woodard, Joshua D., 2012. "Do RIN Mandates and Blender's Tax Credit Affect Blenders' Hedging Strategies?," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124980, Agricultural and Applied Economics Association.
- Fernandez, Viviana, 2008.
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Physica A: Statistical Mechanics and its Applications,
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- Viviana Fernandez, 2006. "Copula-based measures of dependence structure in assets returns," Documentos de Trabajo 228, Centro de Economía Aplicada, Universidad de Chile.
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