Correlation evidence
Like ratings, default correlation is an area of fierce industry debate. But any fundamental, long-term investor searching for fair value in credit correlation will want to understand what the historical data actually says. Here, Arnaud de Servigny and Olivier Renault address this need. By exploring a large rating agency database, they suggest that the link between equity and default correlations is obscured by statistical noise, while risk-free interest rates appear to have little measurable effect
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