We are big fans here at BT of Gunter Meissner who is a perennial FRM author. Before his latest book was added to the syllabus (Correlation Risk Modeling and Management), his previous book Credit Derivatives: Application, Pricing, and Risk Management was assigned for several years and it's a...
Chapter 2: Credit Derivative Products
What is a default swap?
Why default swaps?
Features of default swaps
The default swap premium
The reference obligation
What constitutes default?
Cash versus physical settlement
Hedging with default swaps
Does a default swap...
Hi David, I am struggling to understand this concept of loss occurring (i.e Spread change in Equity Tranche and Mezzanine Tranche).
1) Why does Equity Tranche spread increases if the correlation decreases as shown in the graph below. (eg. If correlation is high in the equity tranche - the...
Contents (.XLS spreadsheet models):
Dependence and Correlation
Two Asset Default Time Copula
CDO Gauss Educational
The One Factor Gaussian...
Finance Math Refresher by Gunter Meissner
This paper contains some basic math to refresh your human memory and prepare you for the math content for the book Correlation Risk Modeling and Management – An Applied Guide including the Basel III Correlation Framework. There are problems at the end...
Learning outcomes: Describe how equity correlations and correlation volatilities behave throughout various economic states. Calculate a mean reversion rate using standard regression and calculate the corresponding autocorrelation. Identify the best-fit distribution for equity, bond, and default...
I wrote to Meissner (I don't see an errata yet for his new book, which is excellent) that I think the example for (3.2.3) Kendall's tau is incorrect. He shows five (x,y) pairs. Five (X,Y) sets implies 10 pairs (of X,Y pairs). 10 is the "triangle number" for 4 = (n-5), see...
Learning Outcomes: Explain how correlation contributed to the global financial crisis of 2007 to 2009.Explain the role of correlation risk in market, credit, systemic, and concentration risk.
502.1. Your colleague Mary conveys to you that she has computed a Pearson correlation...