<t>It is an interesting idea. However the paper uploaded earlier contains several errors. This ends up with the formulas on page 9 as well most of appendix of the uploaded paper being incorrect.The main error is that individual A_j's are no londer normal, when rho(X) is not degenerate, but have a qu...

<t>QuoteHi Dan,I don't disagree that in practise it is not a good idea to just plug equity correlations into your copula model. Perhaps I should have been slightly more specific. What I am saying is that if you accept the gaussian copula model then you are restricted to working with diffusion driven...

<t>Quote1) For a bespoke tranche you would map the expected loss of your bespoke with those of the index and use the equivalent base correlationsThe problem is that the expected loss of your bespoke portfolio is not known. If it were known, you would not need to map anything at all. You would just p...

<t>QuoteOriginally posted by: Gillok, let's assume for the time being that you curve is flat at 15%. so initial spread for (9-12%) = (0-12%)@15%corr-(0-9%)@15%corr (*)and your spread for (12-22%)=(0-22%)@15%corr-(0-12%)@15%corr (**)right?now your spread for 9-12% is higher and the way it's calculate...

<t>QuoteOriginally posted by: karsty...Now take a senior tranche, eg. 9-12%, which should be "long correlation" for just about any interpretation of correlation - in the sense that increased correlation in the portfolio will mean more risk to this tranche. Increase its price, to 25bp say, and reduce...