Limiting dependence structures for tail events, with applications to credit derivatives
By Arthur Charpentier, Alessandro Juri. Journal of Applied Probability, 2006
54 citations recorded by the source corpus.
Dependence structures for bivariate extremal events are analyzed using particular types of copula. Weak convergence results for copulas along the lines of the Pickands-Balkema-de Haan theorem provide limiting dependence structures for bivariate tail events. A characterization of these limiting copulas is also provided by means of invariance properties. The results obtained are applied to the credit risk area, where, for intensity-based default models, stress scenario dependence structures for widely traded products such as credit default swap baskets or first-to-default contract types are proposed.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/c1c8b3779024268081c25b51774c531bea364981
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Citations in the corpus
- Lower tail dependence for Archimedean copulas: Characterizations and pitfalls (2007, unknown): “A function C : [0 , 1] 2 → [0 , 1] is called a strict Archimedean copula if there exists a strict generator ψ such that Note that the generator is unique up to a multiplicative constant.”
- Spatial contagion between financial markets: a copula-based approach (2010, methodology): “A recent and powerful tool for investigating the dependence structure in the tails of the joint df is to consider a conditional model and, then, to investigate the related copula, also called threshold copula or conditional copula [23, 24, 25 , 26, 27, 28, 29, 30].”