The 2007 subprime crisis has induced a persistent disconnection between the LIBOR derivative markets of different tenors and the OIS swap market. Commonly proposed explanations for the corresponding spreads are a combination of credit risk and liquidity risk. However in these explanations the...

In "Dynamic Hedging of Portfolio Credit Risk in a Markov Copula Model", the authors introduced a Markov copula model of portfolio credit risk where pricing and hedging can be done in a sound theoretical and practical way. Further theoretical backgrounds and practical details are developed in "A...

We consider a bottom-up Markovian copula model of {portfolio} credit risk where instantaneous contagion is possible in the form of simultaneous defaults. Due to the Markovian copula nature of the model, calibration of marginals and dependence parameters can be performed separately using a...

We consider the problem of valuation of interest rate derivatives in the post-crisis setup. We develop a multiple-curve model, set in the HJM framework and driven by a L evy process. We proceed with joint calibration to caps and swaptions of different tenors, the calibration to caps guaranteeing...

Banking operations are being rewired around a pair of KVA/FVA metrics which quantify market incompleteness, i.e. the impossibility of perfect replication. The FVA is the cost of funding of debt liabilities while the KVA is the risk adjustment for equity liabilities, also called cost of capital....

In this paper, we prove that the conditional dependence structure of default times in the Markov model of "A Bottom-Up Dynamic Model of Portfolio Credit Risk. Part I: Markov Copula Perspective" belongs to the class of Marshall-Olkin copulas. This allows us to derive a factor representation in...