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Title of article :
Efficient algorithms for basket default swap pricing with multivariate Archimedean copulas
Author/Authors :
Choe، نويسنده , , Geon Ho and Jang، نويسنده , , Hyun Jin، نويسنده ,
Issue Information :
روزنامه با شماره پیاپی سال 2011
Pages :
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Abstract :
We introduce a new importance sampling method for pricing basket default swaps employing exchangeable Archimedean copulas and nested Gumbel copulas. We establish more realistic dependence structures than existing copula models for credit risks in the underlying portfolio, and propose an appropriate density for importance sampling by analyzing multivariate Archimedean copulas. To justify efficiency and accuracy of the proposed algorithms, we present numerical examples and compare them with the crude Monte Carlo simulation, and finally show that our proposed estimators produce considerably smaller variances.
Keywords :
Archimedean copula , credit risk , Nested Archimedean copula , Basket default swap , importance sampling
Journal title :
Insurance Mathematics and Economics
Journal title :
Insurance Mathematics and Economics
Serial Year :
Link To Document :