Basket Default Swaps, CDO’s and Factor Copulas
نویسندگان
چکیده
We consider a factor approach to the pricing of basket credit derivatives and synthetic CDO tranches. Our purpose is to deal in a convenient way with dependent defaults for a large number of names. We provide semi-explicit expressions of the stochastic intensities of default times and pricing formulae for basket default swaps and CDO tranches. Two cases are studied in detail: mean-variance mixture models and frailty models. We also compare prices under Gaussian and Clayton copulas.
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