Pricing credit derivatives with a copula-based actuarial model for credit risk

MASALA, G.;MENZIETTI, M.;MICOCCI, M.

2008-01-01

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Abstract

In this chapter we present a model for the valuation of some multiname credit derivatives. Pricing methods use standard techniques of risk-neutral valuation, while the risk of the underlying credit portfolio uses both traditional tools of credit risk valuations of actuarial kind and more recent ones like copula functions for modeling the dependence structure between the debtors [see, for example, Masala et al. (2004)]. Several numerical applications conclude the chapter.