Multiname and Multiscale Default Modeling

Multiname and Multiscale Default Modeling

Multiname default modeling is crucial in the context of pricing credit derivatives such as Collaterized Debt Obligations (CDOs). We consider here a simple reduced form approach for multiname defaults based on the Vasicek or Ornstein-Uhlenbeck model for the hazard rates of the underlying names. We analyze the impact of volatility time scales on the default distribution and CDO prices. We demonst...

Modeling Default Risk Modeling

Default risk is the uncertainty surrounding a firm's ability to service its debts and obligations. Prior to default, there is no way to discriminate unambiguously between firms that will default and those that won't. At best we can only make probabilistic assessments of the likelihood of default. As a result, firms generally pay a spread over the default-free rate of interest that is proportion...

Multiscale modeling

Multiscale Computing with the Multiscale Modeling Library and Runtime Environment

We introduce a software tool to simulate multiscale models: the Multiscale Coupling Library and Environment 2 (MUSCLE 2). MUSCLE 2 is a component-based modeling tool inspired by the multiscale modeling and simulation framework, with an easy-to-use API which supports Java, C++, C, and Fortran. We present MUSCLE 2’s runtime features, such as its distributed computing capabilities, and its benefit...

Principles of Multiscale Modeling