IDEAS home Printed from https://ideas.repec.org/h/wsi/wschap/9789814571647_0002.html
   My bibliography  Save this book chapter

A Bottom-Up Dynamic Model of Portfolio Credit Risk. Part I: Markov Copula Perspective

In: 2012 Recent Advances in Financial Engineering Proceedings of the International Workshop on Finance 2012

Author

Listed:
  • Tomasz R. Bielecki
  • Areski Cousin
  • Stéphane Crépey
  • Alexander Herbertsson

Abstract

We consider a bottom-up Markovian copula model of portfolio credit risk where instantaneous contagion is possible in the form of simultaneous defaults. Due to the Markovian copula nature of the model, calibration of marginals and dependence parameters can be performed separately using a two-steps procedure, much like in a standard static copula set-up. In this sense this model solves the bottom-up top-down puzzle which the CDO industry had been trying to do for a long time. It can be applied to any dynamic credit issue like consistent valuation and hedging of CDSs, CDOs and counterparty risk on credit portfolios.

Suggested Citation

  • Tomasz R. Bielecki & Areski Cousin & Stéphane Crépey & Alexander Herbertsson, 2014. "A Bottom-Up Dynamic Model of Portfolio Credit Risk. Part I: Markov Copula Perspective," World Scientific Book Chapters, in: Akihiko Takahashi & Yukio Muromachi & Takashi Shibata (ed.), 2012 Recent Advances in Financial Engineering Proceedings of the International Workshop on Finance 2012, chapter 2, pages 25-49, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789814571647_0002
    as

    Download full text from publisher

    File URL: https://www.worldscientific.com/doi/pdf/10.1142/9789814571647_0002
    Download Restriction: Ebook Access is available upon purchase.
    File URL: https://www.worldscientific.com/doi/abs/10.1142/9789814571647_0002
    Download Restriction: Ebook Access is available upon purchase.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Herbertsson, Alexander, 2022. "Saddlepoint approximations for credit portfolios with stochastic recoveries," Working Papers in Economics 823, University of Gothenburg, Department of Economics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wsi:wschap:9789814571647_0002. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tai Tone Lim (email available below). General contact details of provider: http://www.worldscientific.com/page/worldscibooks .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.