Modelling portfolio credit risk is one of the crucial challenges faced by financial services industry in the last few years. We propose the valuation model of collateralized debt obligations (CDO) based on copula functions with up to three parameters, with default intensities estimated from...

Many industries are exposed to weather risk which they can transfer on financial markets via weather derivatives. Equilibrium models based on partial market clearing became a useful tool for pricing such kind of financial instruments. In a multi-period equilibrium pricing model agents rebalance...

We present two methods based on functional principal component analysis (FPCA) for the estimation of smooth derivatives of a sample of random functions, which are observed in a more than one-dimensional domain.We apply eigenvalue decomposition to a) the dual covariance matrix of the derivatives,...

A State Price Density (SPD) is the density function of a risk neutral equivalent martingale measure for option pricing, and is indispensible for exotic option pricing and portfolio risk management. Many approaches have been proposed in the last two decades to calibrate a SPD using financial...

This study analyzes the loss potential arising from investments into CDS for a sample of large U.S. and German mutual funds. Further, it investigates whether the comments funds make on CDS use in periodic fund reports are consistent with the disclosed CDS holdings. For several funds in the U.S.,...