Risk magazine - Volume18/No11

Unbiased risk-neutral loss distributions

Luigi Vacca introduces entropy maximisation (ME) to derive portfolio loss probabilities that are consistent with standard tranche prices on a credit default swap index. Tranche prices that are calculated using ME are free of arbitrage. A numerical…

Trading down the slopes

The credit derivatives market is growing at an impressive rate, with the credit default swap (CDS) being the most popular instrument. This article is relevant for the trading of CDSs and bond portfolios. Mascia Bedendo, Lara Cathcart, Lina El-Jahel and…

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