Article

Single‐and Multi‐Name Credit Derivatives: Theory and Practice

Alexander Lipton and David Shelton

in The Oxford Handbook of Credit Derivatives

Published in print January 2011 | ISBN: 9780199546787
Published online September 2012 | | DOI: http://dx.doi.org/10.1093/oxfordhb/9780199546787.013.0007

Series: Oxford Handbooks in Finance

 Single‐and Multi‐Name Credit Derivatives: Theory and Practice

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Credit derivatives are contracts whose payouts reference credit events. Depending upon the precise terms of the contract, credit events may include not just the default of a company, but also other events such as restructuring or conservatorship. These subtle differences of definition make little difference in the benign stages of the credit cycle, but when credit events start occurring, they assume high importance. This article begins by summarising some of the most common credit derivative contracts. It then analyses the Gaussian copula model, other copula models, base correlations, pricing bespoke collateralised debt obligations, developments since the Gaussian copula and base correlations, the portfolio loss distribution, and stochastic recovery.

Keywords: credit derivative contracts; Gaussian copula model; collateralised debt obligations; base correlations

Article.  29459 words. 

Subjects: Economics ; Financial Markets ; Econometric and Statistical Methods and Methodology: General

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