Copulas and credit models

Copulas and credit models

drawing-bell-curve

In this article, we focus on the latent variable approach to modelling credit portfolio losses. This methodology underlies all models that descend from Merton’s firm-value model (Merton, 1974). In particular, it underlies the most important industry models, such as those proposed by KMV Corporation and CreditMetrics.

Copulas and credit models

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