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dc.contributor.authorBerd, Arthur-
dc.contributor.authorEngle, Robert-
dc.contributor.authorVoronov, Artem-
dc.date.accessioned2008-05-28T14:49:28Z-
dc.date.available2008-05-28T14:49:28Z-
dc.date.issued2005-10-
dc.identifier.urihttp://hdl.handle.net/2451/26800-
dc.description.abstractWe propose a hybrid model of portfolio credit risk where the dynamics of the underlying latent variables is governed by a one factor GARCH process. The distinctive feature of such processes is that the long-term aggregate return distributions can substantially deviate from the asymptotic Gaussian limit for very long horizons. We introduce the notion of correlation spectrum as a convenient tool for comparing portfolio credit loss generating models and pricing synthetic CDO tranches. Analyzing alternative specifications of the underlying dynamics, we conclude that the asymmetric models with TARCH volatility specification are the preferred choice for generating significant and persistent credit correlation skews.en
dc.language.isoen_USen
dc.relation.ispartofseriesS-DRP-05-04en
dc.titleThe Underlying Dynamics of Credit Correlationsen
dc.typeWorking Paperen
Appears in Collections:Derivatives Research

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