Hello all.I have never been "academically" introduced to the concept ofcopulae, but it appears that they are used extensivelyin credit modeling efforts.I was wondering if someone might be able to offer abrief discussion of they use in a credit modeling framework(concept,strengths, weaknesses).In addition, I was wondering if someone might be ableto offer a suggestion of what is a good way to obtain aworking knowledge of the subject (mostly to be able to followthe literature).Thank you all in advance.

If you search the forum, there are a fair number of threads discussing copulae. I would recommend the CreditMetrics paper by Li for a general overview/introduction of the methodology in a credit modeling context. Schonbucher is an author with papers available on-line regarding copula methodologies, as is Embrechts. Both of them provide good explanations with a fair amount of technical detail. For a more formal text, the best source is probably the book by Joe. Mashal and Naldi have a paper which goes into pretty good detail on the implementation for credit derivatives.Good luck.

If you are interested in empirical rather than analytical copulae, search the Web for Nick Webber from Warwick. However, choosing a copula-based model the core question is whether you want to use use copula to approximate the distribution of times to default (like Mashall and Naldi) or the distribution of some (probably, very abstract) processes associated with the states of the firms under consideration at a particular moment (like James and Webber). In both cases calibration techniques are either weakly developed or rely on historical default data, which are very limited. (The use of the data on defaults occured 10 years ago is also rather questionable in modellyng defaults, say, on a year interval.)Regards,Rector

hi odiseas, go to the website www.gloriamundi.org and search for the word "copula". you will come across some 12-13 papers as a result of the search. download all, and that will give you more than enough abt where the industry stands in terms of copula usage.