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 …

semimartingale with an equivalent martingale measure that evolves within the bid-ask spread. We show that a continuous, multi …