Balakrishna, B S (2007): Delayed Default Dependency and Default Contagion.
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Delayed, hence non-simultaneous, dependent defaults are discussed in a reduced form model. The model is a generalization of a multi-factor model based on simultaneous defaults to incorporate delayed defaults. It provides a natural smoothening of discontinuities in the joint probability densities in models with simultaneous defaults. It is a dynamic model that exhibits default contagion in a multi-factor setting. It admits an efficient Monte Carlo simulation algorithm that can handle heterogeneous collections of credit names. It can be calibrated to provide exact fits to CDX.NA.IG and iTraxx Europe CDOs just as its version with simultaneous defaults.
|Item Type:||MPRA Paper|
|Original Title:||Delayed Default Dependency and Default Contagion|
|Keywords:||Default Risk; Default Correlation; Default Contagion; Delayed Default; CDO; Monte Carlo|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G13 - Contingent Pricing; Futures Pricing|
|Depositing User:||S Balakrishna|
|Date Deposited:||30. Apr 2009 00:29|
|Last Modified:||13. Feb 2013 20:25|
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