We characterize diversification in corporate credit using a new class of dynamic copula models which can capture … equity return dependence dynamics. Modeling a decade of weekly CDS spreads for 215 firms, we find that copula correlations … high since. Perhaps most importantly, tail dependence of CDS spreads increase even more than copula correlations during the …

distribution. Using copula decomposition we can set up a model for each factor individually along with a model for their dependence …

through a copula representation of the bivariate risk-neutral density. For this purpose, we employ either the one …