Balakrishna, B S (2006): A SemiAnalytical Parametric Model for Dependent Defaults.

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Abstract
A semianalytical parametric approach to modeling default dependency is presented. It is a multifactor model based on instantaneous default correlation that also takes into account higher order default correlations. It is capable of accommodating a term structure of default correlations and has a dynamic formulation in the form of a continuous time Markov chain. With two factors and a constant hazard rate, it provides perfect fits to four tranches of CDX.NA.IG and iTraxx Europe CDOs of 5, 7 and 10 year maturities. With time dependent hazard rates, it provides perfect fits to all the five tranches for all three maturities.
Item Type:  MPRA Paper 

Original Title:  A SemiAnalytical Parametric Model for Dependent Defaults 
Language:  English 
Keywords:  Default Risk; Default Correlation; CDO; Markov Chain; Semianalytical; Parametric 
Subjects:  G  Financial Economics > G1  General Financial Markets > G13  Contingent Pricing ; Futures Pricing 
Item ID:  14918 
Depositing User:  S Balakrishna 
Date Deposited:  30. Apr 2009 00:28 
Last Modified:  20. Feb 2013 19:43 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/14918 