Credit Correlation by Youssef Elouerkhaoui

Author:Youssef Elouerkhaoui
Language: eng
Format: epub
Publisher: Springer International Publishing, Cham

where the -valued coefficients are computed recursively.

As mentioned in Sect. 8.2, for non-homogeneous recovery rates, we need to evaluate the density . First, let us remark that credit i would be the -to-default obligor in an infinitesimal interval iff:

This corresponds to the default of credit i being in the interval , and the total number of defaults is equal to k. If there are instantaneous joint defaults, only the credits in the set define the default-rank for credit i (the references are assumed to be ordered according to the pre-specified recovery-delivery rule). In other words, a credit l would be considered to be in default before credit i if , or and . Thus, we need to compute

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