Pricing of a CDO base tranche is considered when copula is comonotone and approximations are derived for the base tranche expected loss, obtained with a one-factor Gaussian copula model, when correlations are sufficiently close to 100%. Numerical examples are provided showing that a two-term...

Having appreciated that the credit component of an uncollateralized derivative represents new borrowing and hence that it is as much a derivative as a straight bond, we propose an extension of a Merton-type Firm Value Model to deal with valuation of such component (DVA/CVA) in a risk-neutral...

We propose a bottom-up dynamic credit modelling framework. To achieve a non-trivial coupling, the marginal survival probability processes are multiplied by a common exponential martingale process. Still being a factor coupling, this approach relies on convolution of the conditionally independent...