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Issue DateTitleSub-TitleAuthor(s)Journal NameVolume NumberIssue NumberPages
110-Jun-2012Default correlations-Ghosh, Pulak ; Murthy, Shashidhar 

Abstract
While correlation (and diversification) is important to all investments, it is especially important to credit-sensitive securities as evidenced by the role of correlated defaults in the recent credit crisis. Correlation in the context of credit is a difficult issue because of sparse historical data on individual, and especially multiple, defaults. Hence, researchers and market participants have used market prices to construct forward-looking estimates of correlation. However, the only known ways of doing so are from multi-name securities (such as indexes, or collateralized debt obligations). Such instruments are far fewer in number than possible pairs of single-names (i.e. individual stocks, bonds, etc) – i.e. they are non-existent for most pairs. For these reasons, the modeling of correlations is termed by many as an extremely important problem in credit risk pricing.
 
Keyword(s)
Statistics
Correlations
Project title
Default correlations
Project Coordinator
 
Status
Completed
Expected Completion
10-06-2012
 
Co-Investigator(s)