L Sankar, Jure Skarabot


Q: In layman's terms, how was the Gaussian copula model developed and what modelling assumptions does it make?

A: The Gaussian copula model (GCM) is used for generating the distribution of correlated defaults in a portfolio of credits. The GCM has established itself as the market standard model for pricing tranches of synthetic collateralised debt obligations (CDOs). The mathematical framework for the approach had already existed in the actuarial literature for the modelling of dependence in

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