Joint survival probability via truncated invariant copula

Jeong Hoon Kim, Yong Ki Ma, Chan Yeol Park

Research output: Contribution to journalArticle

2 Citations (Scopus)

Abstract

Given an intensity-based credit risk model, this paper studies dependence structure between default intensities. To model this structure, we use a multivariate shot noise intensity process, where jumps occur simultaneously and their sizes are correlated. Through very lengthy algebra, we obtain explicitly the joint survival probability of the integrated intensities by using the truncated invariant Farlie-Gumbel-Morgenstern copula with exponential marginal distributions. We also apply our theoretical result to pricing basket default swap spreads. This result can provide a useful guide for credit risk management.

Original languageEnglish
Pages (from-to)68-76
Number of pages9
JournalChaos, Solitons and Fractals
Volume85
DOIs
Publication statusPublished - 2016 Apr

Fingerprint

Survival Probability
Copula
Credit Risk
Invariant
Shot Noise
Swap
Dependence Structure
Risk Management
Marginal Distribution
Exponential distribution
Pricing
Jump
Algebra
Model

All Science Journal Classification (ASJC) codes

  • Statistical and Nonlinear Physics
  • Mathematics(all)
  • Physics and Astronomy(all)
  • Applied Mathematics

Cite this

Kim, Jeong Hoon ; Ma, Yong Ki ; Park, Chan Yeol. / Joint survival probability via truncated invariant copula. In: Chaos, Solitons and Fractals. 2016 ; Vol. 85. pp. 68-76.
@article{2a8ee0a34fba4e85bd7b2c985f5ad232,
title = "Joint survival probability via truncated invariant copula",
abstract = "Given an intensity-based credit risk model, this paper studies dependence structure between default intensities. To model this structure, we use a multivariate shot noise intensity process, where jumps occur simultaneously and their sizes are correlated. Through very lengthy algebra, we obtain explicitly the joint survival probability of the integrated intensities by using the truncated invariant Farlie-Gumbel-Morgenstern copula with exponential marginal distributions. We also apply our theoretical result to pricing basket default swap spreads. This result can provide a useful guide for credit risk management.",
author = "Kim, {Jeong Hoon} and Ma, {Yong Ki} and Park, {Chan Yeol}",
year = "2016",
month = "4",
doi = "10.1016/j.chaos.2016.01.012",
language = "English",
volume = "85",
pages = "68--76",
journal = "Chaos, Solitons and Fractals",
issn = "0960-0779",
publisher = "Elsevier Limited",

}

Joint survival probability via truncated invariant copula. / Kim, Jeong Hoon; Ma, Yong Ki; Park, Chan Yeol.

In: Chaos, Solitons and Fractals, Vol. 85, 04.2016, p. 68-76.

Research output: Contribution to journalArticle

TY - JOUR

T1 - Joint survival probability via truncated invariant copula

AU - Kim, Jeong Hoon

AU - Ma, Yong Ki

AU - Park, Chan Yeol

PY - 2016/4

Y1 - 2016/4

N2 - Given an intensity-based credit risk model, this paper studies dependence structure between default intensities. To model this structure, we use a multivariate shot noise intensity process, where jumps occur simultaneously and their sizes are correlated. Through very lengthy algebra, we obtain explicitly the joint survival probability of the integrated intensities by using the truncated invariant Farlie-Gumbel-Morgenstern copula with exponential marginal distributions. We also apply our theoretical result to pricing basket default swap spreads. This result can provide a useful guide for credit risk management.

AB - Given an intensity-based credit risk model, this paper studies dependence structure between default intensities. To model this structure, we use a multivariate shot noise intensity process, where jumps occur simultaneously and their sizes are correlated. Through very lengthy algebra, we obtain explicitly the joint survival probability of the integrated intensities by using the truncated invariant Farlie-Gumbel-Morgenstern copula with exponential marginal distributions. We also apply our theoretical result to pricing basket default swap spreads. This result can provide a useful guide for credit risk management.

UR - http://www.scopus.com/inward/record.url?scp=84957809543&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84957809543&partnerID=8YFLogxK

U2 - 10.1016/j.chaos.2016.01.012

DO - 10.1016/j.chaos.2016.01.012

M3 - Article

AN - SCOPUS:84957809543

VL - 85

SP - 68

EP - 76

JO - Chaos, Solitons and Fractals

JF - Chaos, Solitons and Fractals

SN - 0960-0779

ER -