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Infectious defaults

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  • M. Davis
  • V. Lo

Abstract

Mark Davis and Violet Lo introduce a contagion model to account for concentration risk in large portfolios of defaultable securities, which provides a purely probabilistic alternative to Moody's diversity score analysis, with parsimonious parametrization and easy simulation.

Suggested Citation

  • M. Davis & V. Lo, 2001. "Infectious defaults," Quantitative Finance, Taylor & Francis Journals, vol. 1(4), pages 382-387.
  • Handle: RePEc:taf:quantf:v:1:y:2001:i:4:p:382-387 DOI: 10.1080/713665832
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    References listed on IDEAS

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    1. Robert C. Merton, 2005. "Theory of rational option pricing," World Scientific Book Chapters,in: Theory Of Valuation, chapter 8, pages 229-288 World Scientific Publishing Co. Pte. Ltd..
    2. Martin Kulldorff & Ajay Khanna, 1999. "A generalization of the mutual fund theorem," Finance and Stochastics, Springer, vol. 3(2), pages 167-185.
    3. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
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