Technical paper

Gamma process dynamic modelling of credit

The existing generation of credit derivatives models is unsatisfactory because they generally contain arbitrage, cannot describe the dynamics of the process, and are hard to extend beyond vanilla products. Martin Baxter has created a new tractable family…

Going downturn

There is much debate regarding the definition of 'downturn' loss given default (LGD). In this article, Michael Barco offers an analytic approach for calculating downturn LGD so that credit risk capital is not underestimated or overestimated

The determinants of corporate credit spreads

Credit default swaps (CDSs) are an integral tool used for the management of credit risk by financial institutions. Despite their importance, good models for the determination of CDS spreads, also called corporate credit spreads, are not readily available…

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