We investigate the influence of the dependence between random losses on the shortfall and on the diversification benefit that arises from merging these losses.We prove that increasing the dependence between losses, expressed in terms of correlation order, has an increasing effect on the...

In this paper we employ a one-factor Lévy model to determine basket option prices. More precisely, basket option prices are determined by replacing the distribution of the real basket with an appropriate approximation. For the approximate basket we determine the underlying characteristic...

In this paper we consider the problem of deriving correlation estimates from observed option data. An implied correlation estimate arises when we match the observed index option price with a corresponding model price. The underlying model assumes that stock prices can be described using a...

In this paper we consider the problem of deriving correlation estimates from observed option data. An implied correlation estimate arises when we match the observed index option price with a corresponding model price. The underlying model assumes that stock prices can be described using a...

We consider a single period portfolio of n dependent credit risks that are subject to default during the period. We show that using stochastic loss given default random variables in conjunction with default correlations can give rise to an inconsistent set of assumptions for estimating the...

In this pedagogical note, it is shown how extremal values of classical measures of association like Pearson's correlation coeffcient, Kendall's τ, Spearman's ρ and Gini's γ characterize comonotonicity and countermonotonicity. The link between zero-correlation and mutual independence is also...