In this paper, we address the problem of incorporating default dependency in intensity - based credit risk models. Following the works of Li [2000], Giesecke [2001] and Schonbucher and Schubert [2001], we use copulas to model the joint distribution of the default times. Two approaches are...

Copula functions have been introduced recently in finance. They are a general tool to construct multivariate distributions and to investigate dependence structure between random variables. In this paper, we show that copula functions may be extensively used to solve many financial problems. As...

Estimating asset correlations is difficult in practice since there is little available data and many parameters have to be found. Paul Demey, Jean-Frédéric Jouanin, Céline Roget and Thierry Roncalli present a tractable version of the multi-factor Merton model in which firms are sorted into...