We present a class of flexible and tractable static factor models for the term structure of joint default probabilities, the factor copula models. These high-dimensional models remain parsimonious with pair-copula constructions, and nest many standard models as special cases. The loss...

Several models of how to price synthetic CDOs are presented. The study focuses on comparison of classical Gaussian copula with NIG copula, double t-copula and gaussian stochastic correlation model. Because the the t-copula is technically the most demanding of the presented approaches and usually...

Modeling the portfolio credit risk is one of the crucial issues of the last years in the financial problems. We propose the valuation model of Collateralized Debt Obligations based on a one- and two-parameter copula and default intensities estimated from market data. The presented method is used...

We propose and test a new algorithm for the numerical integration of the conditional total portfolio loss distribution over the market factor in the one-factor Gaussian copula model. It has higher precision than the popular numerical schemes which use the same or even higher number of sampling...

We discuss in detail the mapping methodology for the valuation of bespoke single tranche Collateralized Debt Obligations in the context of the stochastic recovery gaussian factor modelling framework recently proposed by Amraoui and Hitier (2008)

In this paper, we adopt a partial differential equation (PDE) approach to calculate price and risk measures for mortgage backed securities (MBS). The interest rate path-dependency is handled by an augmented state variable with discrete updating. Compared with the Monte Carlo method, valuation...

In this paper we propose a new pricing methodology for European multi-asset options based on the family of normal mean-variance mixture copulas. The goal is to develop a copula-based method with the flexibility to reproduce the correlation skew, and at the same time efficient enough to be used...

Monte Carlo methods are widely-used simulation tools for market practitioners from trading to risk management. When pricing complex instruments, like mortgage-backed securities (MBS), strong path-dependency and high dimensionality make the Monte Carlo method the most suitable, if not the only,...