Breaking correlation breaks

Breaking correlation breaks

Local correlation has been thoroughly studied in physics in order, for instance, to describe interactions between electrons. In financial mathematics, most research on correlation comes from the credit derivatives industry, such as deriving joint-default distributions consistent with the correlation skews observed on collateralised debt obligation tranches quotes thanks to local Gaussian copulas (Burtschell, Gregory & Laurent, 2005). In equity derivatives, Avellaneda et al (2002) approximated

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What gold's rise means for rates, equities

It has been several years since we have seen volatility in gold. An increase in gold volatility can typically be associated with a change in sentiment and investor behavior. The precious metal has surged this year on increased demand for safe haven…

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