Multiple risky securities valuation I.

Ilya, Gikhman (2008): Multiple risky securities valuation I.

Abstract

In this paper we develop an approach to valuation of a multiple names security portfolio. The goal of the paper to present pricing and calculation of the risk characteristics of the corporate debt based on randomization of the historical data of portfolio assets. Our approach close but it does not coincide with the reduced form interpretation of the credit risk. Based on stochastic interpretation of the default it follows that the market price of a bond is a stochastic process. Therefore, a spot price of a corporate bond implies risk and the bond value shows how market weights the risk. We will show in details how default correlation within securities will affect the basket exposure.

• Item Type: MPRA Paper
• Language: English
• Keywords: Credit derivatives, risky portfolio valuation, copula, perfect copula, CDS, CDO
• Subjects: G - Financial Economics > G2 - Financial Institutions and Services > G22 - Insurance ; Insurance Companies ; Actuarial Studies; G - Financial Economics > G1 - General Financial Markets > G13 - Contingent Pricing ; Futures Pricing

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