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DQF

Seminar

Matching base correlation skew with a naturally time-homogeneous model

Joshi, M (Royal Bank of Scotland)
Friday 25 February 2005, 14:30-15:30

Seminar Room 1, Newton Institute

Abstract

We introduce a new financially motivated model for pricing portfolio credit derivatives. It naturally matches the base correlation skew whilst achieving time-homogeneity; two features lacking in the market-standard Gaussian copula model. The model is easily calibrated and allows effective pricing of exotic credit derivatives such as CDO-squareds.

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