Most investment banks utilise a Gaussian copula to price multi-asset exotic European-style payouts. For more involved payouts, a multi-asset version of Dupire’s local volatility model has become the ...

As global financial markets become increasingly interconnected, accurately modelling correlations between assets is essential. Traditional models often assume static correlations, which fail to ...

"Correlation is not causation. Correlation is not causation. Correlation is not causation … " At times during my statistics studies I felt like Jack Nicholson in the film The Shining, in which we ...

We consider stochastic correlation models that account for the correlation smile in the pricing of synthetic CDO tranches. These can be viewed as tractable extensions of the one-factor Gaussian copula ...

The correlations between the counts are modeled as , (exchangeable correlations). For comparison, the correlations are also modeled as independent (identity correlation matrix). In this model, the ...