In many areas of finance and stochastics, significant advances have been made since this field of research was opened by Black, Scholes and Merton in 1973. Advances in Finance and Stochastics contains a collection of original articles by a number of highly distinguished authors on research...

This article discusses factor models for portfolio credit. In these models, correlations between individual defaults are driven by a few systematic factors. By conditioning on these factors, defaults observed within are independent. This allows a greater degree of analytical tractability in the...