Implications of Default Dependency on Portfolio Risk
9 Pages Posted: 30 Jun 2021
Date Written: June 01, 2021
We highlight important and specific characteristics of default risk and methodological implications. In a simulation contrasting independent, Gaussian and Clayton copulas, we also show that joint default probabilities might be a hidden source of risk in conventional portfolio models of default.
Keywords: default risk, credit risk, copula, dependency, portfolio analysis, risk management
JEL Classification: G11,C02,C15
Suggested Citation: Suggested Citation