Joint survival probability via truncated invariant copula

Jeong Hoon Kim; Yong Ki Ma; Chan Yeol Park

doi:10.1016/j.chaos.2016.01.012

Joint survival probability via truncated invariant copula

Jeong Hoon Kim, Yong Ki Ma, Chan Yeol Park

Department of Mathematics

Research output: Contribution to journal › Article › peer-review

4 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 language	English
Pages (from-to)	68-76
Number of pages	9
Journal	Chaos, Solitons and Fractals
Volume	85
DOIs	https://doi.org/10.1016/j.chaos.2016.01.012
Publication status	Published - 2016 Apr

Bibliographical note

Funding Information:
Yong-Ki Ma’s work was supported by the National Research Foundation of Korea (NRF) grant funded by the Korea government (MSIP) (No. 2015R1C1A1A01054663 ). The research of J.-H. Kim was supported by the National Research Foundation of Korea NRF- 2013R1A1A2A10006693 .

Publisher Copyright:
© 2016 Elsevier Ltd. All rights reserved.

All Science Journal Classification (ASJC) codes

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

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10.1016/j.chaos.2016.01.012

Cite this

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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.",

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doi = "10.1016/j.chaos.2016.01.012",

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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.

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SN - 0960-0779

ER -

Joint survival probability via truncated invariant copula

Abstract

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