Comonotonic Default Quote Paths for Basket Evaluation
نویسندگان
چکیده
Abstract. The evaluation of structured credit products like baskets and collateralized debt obligations (CDOs) most often relies on the simulation of correlated default times for the underlying pool of credit instruments. Given the distribution of a default time vector one can find the distribution of the corresponding (cumulative) default quote path for a portfolio. In this note we show that the multivariate dependence of marginal default quote distributions over time can be based on a comonotonic structure without loosing information regarding default timing. Based on comonotonicity, default quote paths and random variables arising from basket evaluation like the time until the n-th default can be simulated very efficiently.
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