This article describes the Basel II capital rules for securitization exposures, explaining the considerations that influenced regulators' decisions, the approaches for calculating capital and how banks will apply them, the financial engineering that underlies the different approaches and the...

In standard ratings-based models for analyzing credit portfolios and pricing credit derivatives, it is assumed that defaults and recoveries are statistically independent. This paper presents evidence that aggregate quarterly default rates and recovery rates are, in fact, negatively correlated....

This paper generalizes a class of ratings-based credit derivative models proposed by Jarrow, Lando, and Turnbull (1997) and Kijima and Komoribayashi (1998) to allow for stochastic spreads and then applies this model to analyze empirically the pricing of large cross sections of corporate bonds...

This paper presents techniques for hedging structured products in incomplete markets. Under actual distributions, we simulate correlated ratings histories for pool exposures up to the hedging horizon and then employ conditional pricing functions estimated from a preliminary Monte Carlo based on...

The recent interest in portfolio credit risk modelling has concentrated attention on the correlation structure of credit risk. This paper calculates long-holding period correlations for emerging market sovereign spreads and compares these with the correlations of equity market indices for the...