Implications of Default Dependency on Portfolio Risk

9 Pages Posted: 30 Jun 2021

Date Written: June 01, 2021

Abstract

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

Steiner, Andreas, Implications of Default Dependency on Portfolio Risk (June 01, 2021). Available at SSRN: https://ssrn.com/abstract=3870783 or http://dx.doi.org/10.2139/ssrn.3870783

Andreas Steiner (Contact Author)

Andreas Steiner Consulting GmbH ( email )

Walderstrasse 43c
Hinwil, 8340
Switzerland

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