IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

On Default Correlation And Pricing Of Collateralized Debt Obligation By Copula Functions

Listed author(s):

    (Department of Finance, Beihang University, Beijing 100083, China)


    (Department of Finance, Beihang University, Beijing 100083, China)



    (Department of Computer Science, City University of Hong Kong, Tat Chee Avenue, Kowloon, Hong Kong, China)


    (School of Economics and Finance, Victoria University of Wellington, Wellington, New Zealand)

Default correlation is the key point for the pricing of multi-name credit derivatives. In this paper, we apply copulas to characterize the dependence structure of defaults, determine the joint default distribution, and give the price for a specific kind of multi-name credit derivative — collateralized debt obligation (CDO). We also analyze two important factors influencing the pricing of multi-name credit derivatives, recovery rates and copula function. Finally, we apply Clayton copula, in a numerical example, to simulate default times taking specific underlying recovery rates and average recovery rates, then price the tranches of a given CDO and then analyze the results.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Access to full text is restricted to subscribers.

File URL:
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Journal of Information Technology and Decision Making.

Volume (Year): 05 (2006)
Issue (Month): 03 ()
Pages: 483-493

in new window

Handle: RePEc:wsi:ijitdm:v:05:y:2006:i:03:p:483-493
Contact details of provider: Web page:

Order Information: Email:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wsi:ijitdm:v:05:y:2006:i:03:p:483-493. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Tai Tone Lim)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.