The dependence structure among cell by cell in operational risk matrix is a critical issue in the determination of bank-wide operational risk capital under Advanced Measurement Approach (AMA). Especially, Loss Distribution Approach (LDA), which is one of the main methods in AMA, involves...

A stochastic time-change is applied to introduce dependence to a portfolio of credit-risky assets whose default times are modeled as random variables with arbitrary distribution. The dependence structure of the vector of default times is completely separated from its marginal default...

In order to capture observed asymmetric dependence in international financial returns, we construct a multivariate regime-switching model of copulas. We model dependence with one Gaussian and one canonical vine copula regime. Canonical vines are constructed from bivariate conditional copulas and...

This paper concerns itself with applications of pair-copulas in finance, and bridges the gap between theory and application. We provide a broad view of the problem of modeling multivariate financial log-returns using pair-copulas, gathering together for this purpose theoretical and computational...

In this paper we test for structural changes in the conditional dependence of two-dimensional foreign exchange data. We show that by modeling the conditional dependence structure using copulae we can detect changes in the dependence beyond linear correlation like changes in the tail of the joint...

In Hull and White (2006) we showed how CDO quotes can be used to imply a probability distribution for the hazard rate over the life of the CDO. This is known as the implied copula model. In this paper we develop a parametric version of the implied copula model and show how it can be used for...

This paper is an extract of a more complete and detailed work on a speci c class of credit derivatives, namely Collateralized Debt Obligations made out of Collateralized Debt Obligations, widely known as CDO Squareds (CDO2). This asset class has become quite popular in recent years as it...

The recent financial crisis has highlighted the need for better valuation models and risk management procedures, better understanding of structured products, and has called into question the actions of many financial institutions. It has become commonplace to blame the inadequacy of credit risk...