Multiple risky securities valuation I

Gikhman Ilya

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we develop an approach to valuation of a multiple names security portfolio. The goal of the paper to present pricing and calculation of the risk characteristics of the corporate debt based on randomization of the historical data of portfolio assets. Our approach close but it does not coincide with the reduced form interpretation of the credit risk. Based on stochastic interpretation of the default it follows that the market price of a bond is a stochastic process. Therefore, a spot price of a corporate bond implies risk and the bond value shows how market weights the risk. We will show in details how default correlation within securities will affect the basket exposure.

Keywords: Credit derivatives; risky portfolio valuation; copula; perfect copula; CDS; CDO (search for similar items in EconPapers)
JEL-codes: G13 G22 (search for similar items in EconPapers)
Date: 2008, Revised 2011
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:34511

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