Market-implied Archimedean copulas

The credit derivatives market has experienced explosive growth in the past decade. Banks have created and maintained a series of index portfolios, such as CDX North America and iTraxx Europe, to promote market liquidity. A set of standardised index tranches, with fixed attachments and detachments, is being traded daily by brokers and dealers in the over-the-counter market. At the same time, buyers and sellers of protection have traded tranches of customised portfolios, so-called 'bespokes'.


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