This paper presents a framework to model correlated default events that can be used to price and hedge standard and exotic credit baskets whose values depend on the realized losses of a default portfolio. The model consists of parametric continuous time Markov chain and aims to accurately...

In risk management it is desirable to grasp the essential statistical features of a time series representing a risk factor. This tutorial aims to introduce a number of different stochastic processes that can help in grasping the essential features of risk factors describing different asset...

In this paper we develop a class of applied probabilistic continuous time but discretized state space decompositions of the characterization of a multivariate generalized diffusion process. This decomposition is novel and, in particular, it allows one to construct families of mimicking classes...

We develop a new class of techniques that takes a copula function and quantifies the dependence properties through a localized coefficient of dependence in the state space. Effectively we develop a numerical procedure to map any copula function to a generalized Gaussian copula function. This...

This paper contains facts and introductory concepts on Asset and Liability Management, Funds Transfer Pricing Systems and Funding Costs. Banks, hedge funds and more generally finance companies engage in complex capital market activities that involve trading of instruments in derivative or cash...

In risk management it is desirable to grasp the essential statistical features of a time series representing a risk factor. This tutorial aims to introduce a number of different stochastic processes that can help in grasping the essential features of risk factors describing different asset...

We investigate aspects of semimartingale decompositions, approximation and the martingale representation for multidimensional correlated Markov processes. A new interpretation of the dependence among processes is given using the martingale approach. We show that it is possible to represent, in...