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- Publisher Website: 10.1093/imaman/dpaa013
- Scopus: eid_2-s2.0-85104853094
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Article: How correlation risk in basket credit derivatives might be priced and managed?
Title | How correlation risk in basket credit derivatives might be priced and managed? |
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Authors | |
Issue Date | 2021 |
Publisher | Oxford University Press. The Journal's web site is located at http://imaman.oxfordjournals.org/ |
Citation | IMA Journal of Management Mathematics, 2021, v. 32 n. 2, p. 195-219 How to Cite? |
Abstract | In this paper, we construct quantitative models in which the dependence structure of the firms’ default times is incorporated. Such models serve as the underlying frameworks in our proposed approach to price and hedge basket credit derivatives. Through the Gaussian copula-based method, we model the default correlation risk and develop valuation formulas for credit derivatives. Using single-name derivatives in a hedging strategy for basket credit derivatives, the utility of the delta and delta-gamma hedging techniques are examined. This enables the management of risk attributed to the changes in correlation without the need for a large number of hedging instruments. Our research contributions provide insights on how dependent risks in basket credit derivatives could be dealt with effectively. |
Persistent Identifier | http://hdl.handle.net/10722/300928 |
ISSN | 2021 Impact Factor: 2.095 2020 SCImago Journal Rankings: 0.484 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Zhu, DM | - |
dc.contributor.author | Gu, JW | - |
dc.contributor.author | YU, FH | - |
dc.contributor.author | Ching, WK | - |
dc.contributor.author | Siu, TK | - |
dc.date.accessioned | 2021-07-06T03:12:10Z | - |
dc.date.available | 2021-07-06T03:12:10Z | - |
dc.date.issued | 2021 | - |
dc.identifier.citation | IMA Journal of Management Mathematics, 2021, v. 32 n. 2, p. 195-219 | - |
dc.identifier.issn | 1471-678X | - |
dc.identifier.uri | http://hdl.handle.net/10722/300928 | - |
dc.description.abstract | In this paper, we construct quantitative models in which the dependence structure of the firms’ default times is incorporated. Such models serve as the underlying frameworks in our proposed approach to price and hedge basket credit derivatives. Through the Gaussian copula-based method, we model the default correlation risk and develop valuation formulas for credit derivatives. Using single-name derivatives in a hedging strategy for basket credit derivatives, the utility of the delta and delta-gamma hedging techniques are examined. This enables the management of risk attributed to the changes in correlation without the need for a large number of hedging instruments. Our research contributions provide insights on how dependent risks in basket credit derivatives could be dealt with effectively. | - |
dc.language | eng | - |
dc.publisher | Oxford University Press. The Journal's web site is located at http://imaman.oxfordjournals.org/ | - |
dc.relation.ispartof | IMA Journal of Management Mathematics | - |
dc.rights | Post-print: This is a pre-copy-editing, author-produced PDF of an article accepted for publication in [insert journal title] following peer review. The definitive publisher-authenticated version [insert complete citation information here] is available online at: xxxxxxx [insert URL that the author will receive upon publication here]. | - |
dc.title | How correlation risk in basket credit derivatives might be priced and managed? | - |
dc.type | Article | - |
dc.identifier.email | Ching, WK: wching@hku.hk | - |
dc.identifier.authority | Ching, WK=rp00679 | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1093/imaman/dpaa013 | - |
dc.identifier.scopus | eid_2-s2.0-85104853094 | - |
dc.identifier.hkuros | 323249 | - |
dc.identifier.volume | 32 | - |
dc.identifier.issue | 2 | - |
dc.identifier.spage | 195 | - |
dc.identifier.epage | 219 | - |
dc.identifier.isi | WOS:000637279900004 | - |
dc.publisher.place | United Kingdom | - |