C*D
发帖数: 52 | 1 Hazard rates of A and B are 1% and 2%. A contract pays you $1 if A defaults
earlier than B. The price of the contract has lowest price when the
correlation is _?
我对credit derivative不熟，麻烦大家指点一下. thx a lot! | r**a
发帖数: 536 | 2 I double that there is any deterministic answer for this question.
My idea is that we can glue the 2 marginal distribution of the two default
times by using any copula. Thus, we got a joint distribution and then can
use this joint distribution to price the contract. But using different
copula, we may hit different price and different correlation between A and B
. So I doubt there is a deterministic answer for this question.
If i am wrong, please correct me. | C*D
发帖数: 52 | 3 thank you, I think the original question assumes Gaussian copula...
B
【在 r**a 的大作中提到】
: I double that there is any deterministic answer for this question.
: My idea is that we can glue the 2 marginal distribution of the two default
: times by using any copula. Thus, we got a joint distribution and then can
: use this joint distribution to price the contract. But using different
: copula, we may hit different price and different correlation between A and B
: . So I doubt there is a deterministic answer for this question.
: If i am wrong, please correct me.
| l*******1
发帖数: 113 | 4 Intuitively, when correlation is highest, its lowest
when the two are perfectly correlated, 1/3 chance A happens first.
When the two are negatively correlated, 1/2 chance A happens first.
I know nothing about credit. just intuition |
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