The pricing of portfolio credit risk
The pricing of portfolio credit risk
Rate this book:
About This Book
Equity and credit-default-swap (CDS) markets are in disagreement as to the extent to which asset returns co-move across firms. This suggests market segmentation and casts ambiguity about the asset-return correlations underpinning observed prices of portfolio credit risk. The ambiguity could be eliminated by -- currently unavailable -- data that reveal the market valuation of low-probability/large-impact events. At present, judicious assumptions about this valuation can be used to reconcile observed prices with asset-return correlations implied by either equity or CDS markets. These conclusions are based on an analysis of tranche spreads of a popular CDS index, which incorporate a rather small premium for correlation risk.
Buy This Book
As an Amazon Associate and Bookshop.org affiliate, BookOrb earns from qualifying purchases.
Write a Review
Sign in to write a review.
More by Nikola A. Tarashev
An empirical evaluation of str
An empirical evaluation of structural credit risk models
Are speculative attacks trigge
Are speculative attacks triggered by sunspots?
Currency crises and the inform
Currency crises and the informational role of interest rates
Modelling and calibration erro
Modelling and calibration errors in measures of portfolio credit risk
Speculative attacks, private s
Speculative attacks, private signals and intertemporal trade-offs