Pricing k ^th realization derivatives and collateralized debt obligation with multivariate Fréchet copula

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• 作者：Zhijin Chen ; Jingping Yang ; Xiaoqian Wang
• 关键词：Multivariate Fréchet copula ; kth realization derivative ; order statistics ; collateralized debt obligation (CDO)
• 刊名：Frontiers of Mathematics in China
• 出版年：2016
• 出版时间：December 2016
• 年：2016
• 卷：11
• 期：6
• 页码：1419-1450
• 全文大小：750 KB
• 刊物类别：Mathematics and Statistics
• 刊物主题：Mathematics
  Mathematics
  Chinese Library of Science
  
• 出版者：Higher Education Press, co-published with Springer-Verlag GmbH
• ISSN：1673-3576
• 卷排序：11

文摘

Copula method has been widely applied to model the correlation among underlying assets in financial market. In this paper, we propose to use the multivariate Fréchet copula family presented in J. P. Yang et al. [Insurance Math. Econom., 2009, 45: 139–147] to price multivariate financial instruments whose payoffs depend on the kth realization of the underlying assets and collateralized debt obligation (CDO). The advantage of the multivariate Fréchet copula is discussed. Empirical study shows that such copula family gives a better fitting to CDO’s market price than Gaussian copula for some derivatives.