Intensity gamma

In the past few years, the portfolio credit derivatives market has grown rapidly. Such derivatives pay out in line with the defaults of a number of reference assets. A feature of such derivatives is therefore that the co-dependence of the assets' default times is a strong driver of their price. In this article, we introduce a new mechanism for achieving default dependence that has attractive features, including ease of calibration, time-homogeneity and the ability to match market prices.


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