The kth default time distribution and basket default swap pricing

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We propose an alternative method for finding the kth default time distribution in a homogeneous portfolio with dependency. Analysing order statistics of default times with a one-factor Gaussian copula model, we explicitly derive the probability distribution. Moreover, we compute the prices of basket default swaps such as the kth to default swaps and m out of n default swaps within our framework. To test the efficiency and accuracy of our method we compare the theoretical prediction with existing methods.
Publisher
ROUTLEDGE JOURNALS
Issue Date
2011
Language
English
Article Type
Article
Citation

QUANTITATIVE FINANCE, v.11, pp.1793 - 1801

ISSN
1469-7688
DOI
10.1080/14697688.2010.494611
URI
http://hdl.handle.net/10203/93705
Appears in Collection
MA-Journal Papers(저널논문)
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