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Density approach in modelling multi-defaults

Author

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  • Nicole El Karoui

    () (LPMA - Laboratoire de Probabilités et Modèles Aléatoires - UPMC - Université Pierre et Marie Curie - Paris 6 - UPD7 - Université Paris Diderot - Paris 7 - CNRS - Centre National de la Recherche Scientifique)

  • Monique Jeanblanc

    () (Laboratoire Analyse et Probabilités - UEVE - Université d'Évry-Val-d'Essonne - PRES Universud Paris - Fédération de Mathématiques d'Evry Val d'Essonne)

  • Ying Jiao

    () (SAF - Laboratoire Science Actuarielle et Financière - UCBL - Université Claude Bernard Lyon 1)

Abstract

We apply the default density framework developed in El Karoui et al. \cite{ejj1} to modelling of multiple defaults, which can be adapted to both top-down and bottom-up models. We present general pricing results and establish links with the classical intensity approach. Explicit models are also proposed by using the methods of change of probability measure or dynamic copula.

Suggested Citation

  • Nicole El Karoui & Monique Jeanblanc & Ying Jiao, 2013. "Density approach in modelling multi-defaults," Working Papers hal-00870492, HAL.
  • Handle: RePEc:hal:wpaper:hal-00870492 Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00870492
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    References listed on IDEAS

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    1. Alexander Herbertsson, 2011. "Modelling default contagion using multivariate phase-type distributions," Review of Derivatives Research, Springer, vol. 14(1), pages 1-36, April.
    2. Philippe Ehlers & Philipp Schönbucher, 2009. "Background filtrations and canonical loss processes for top-down models of portfolio credit risk," Finance and Stochastics, Springer, vol. 13(1), pages 79-103, January.
    3. Tomasz Bielecki & Stephane Crepey & Monique Jeanblanc, 2010. "Up and down credit risk," Quantitative Finance, Taylor & Francis Journals, vol. 10(10), pages 1137-1151.
    4. Rama Cont & Andreea Minca, 2013. "Recovering portfolio default intensities implied by CDO quotes," Post-Print hal-00413730, HAL.
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    Cited by:

    1. Christophette Blanchet-Scalliet & Diana Dorobantu & Yahia Salhi, 2016. "A Model-Point Approach to Indifference Pricing of Life Insurance Portfolios with Dependent Lives," Working Papers hal-01258645, HAL.

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