Multivariate Survival Modelling: A Unified Approach with Copulas

Abstract:     
In this paper, we review the use of copulas for multivariate survival modelling. In particular, we study properties of survival copulas and discuss the dependence measures associated to this construction. Then, we consider the problem of competing risks. We derive the distribution of the failure time and order statistics. After having presented statistical inference, we finally provide financial applications which concern the life time value (attrition models), the link between default, prepayment and credit life, the measure of risk for a credit portfolio and the pricing of credit derivatives.

Number of Pages in PDF File: 72

Keywords: Survival copula, frailty model, ageing concepts, competing risks, failure time, order statistics, prepayment, credit risk measure, default mode, correlated defaults, risk-bucket capital charge, default digital put, credit default swap, first-to-default

JEL Classification: G00

working papers series