The SkewedtDistribution for Portfolio Credit Risk

The Skewed t Distribution for Portfolio Credit Risk∗ Wenbo Hu† Bell Trading Alec N. Kercheval‡ Florida State University Abstract Portfolio credit derivatives, such as basket credit default swaps (basket CDS), require for their pricing an estimation of the depen- dence structure of defaults, which is known to exhibit tail dependence as reflected in observed default contagion. A popular model with this property is the (Student's) t copula; unfortunately there is no fast method to calibrate the degree of freedom parameter.

• distribution of daily equity prices
• normal mean-variance mixture variable with distribution
• basket cds
• dependence structure of prices
• default times
• basket credit default swaps
• inverse gamma distribution
• multivariate equity returns
• distributions
• distribution