The relation between asset correlation and default probability is critical for determining bank regulatory capital requirements. It is assumed negative for sovereign, corporate and banking exposures by the Basel Committee on Banking Supervision. This article provides likelihood ratio tests for...

The paper derives maximum likelihood parameter estimators for symmetrically correlated Weiner processes observed at discrete intervals. Such processes arise when pricing and determining Value-at-Risk for portfolio derivatives. Cases of driftless and mean-reverting state variables are considered....

The paper derives maximum likelihood parameter estimators for symmetrically correlated Weiner processes observed at discrete intervals. Such processes arise when pricing and determining Value-at-Risk for portfolio derivatives. Cases of driftless and mean-reverting state variables are considered....