This paper analyses the most widely applied correlation approaches in finance. We first discuss primarily bottom-up approaches, as correlating Brownian motions (Heston 1993), the binomial correlation approach (Lucas 1995), Copulas (Sklar 1959, Li 2000), lattice models with dynamic copulas...

The default of a participant at Nasdaq Clearing in 2018 and the recent COVID-19 events brought to the attention of risk managers at CCPs the importance of appropriately measuring correlation breakdowns. The sizable price dislocations registered on these occasions suggested that traditional risk...