Journal of Applied Probability

Limiting dependence structures for tail events, with applications to credit derivatives

Abstract

Dependence structures for bivariate extremal events are analyzed using particular types of copula. Weak convergence results for copulas along the lines of the Pickands-Balkema-de Haan theorem provide limiting dependence structures for bivariate tail events. A characterization of these limiting copulas is also provided by means of invariance properties. The results obtained are applied to the credit risk area, where, for intensity-based default models, stress scenario dependence structures for widely traded products such as credit default swap baskets or first-to-default contract types are proposed.

Article information

Source
J. Appl. Probab. Volume 43, Number 2 (2006), 563-586.

Dates
First available in Project Euclid: 8 July 2006

https://projecteuclid.org/euclid.jap/1152413742

Digital Object Identifier
doi:10.1239/jap/1152413742

Mathematical Reviews number (MathSciNet)
MR2248584

Zentralblatt MATH identifier
1117.62049

Citation

Charpentier, Arthur; Juri, Alessandro. Limiting dependence structures for tail events, with applications to credit derivatives. J. Appl. Probab. 43 (2006), no. 2, 563--586. doi:10.1239/jap/1152413742. https://projecteuclid.org/euclid.jap/1152413742.

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