Pricing and Hedging Credit Derivatives with Copulas
In 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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Volume (Year): 32 (2003)
Issue (Month): 2 (07)
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