On the diversity score: a copula approach. Issue 1 (2nd January 2017)

• Record Type: Journal Article
• Authors: Ben Saïda, Abdallah; Prigent, Jean-luc
• Is Part Of: Statistics. Volume 51:Issue 1(2017)
• Page Start: 188
• Page End: 204
• Publication Date: 2017-01-02
• Subjects: Diversification -- diversity score -- binomial expansion technique -- copula -- lower taildependence; 62P05 -- 62E99 -- 91G70 -- 91G40; Mathematical statistics -- Periodicals; 519.505
• DOI: 10.1080/02331888.2016.1259804
• Languages: English
• ISSNs: 0233-1888

Abstract

ABSTRACT: For the rating process of Collateralized Debt Obligations', Moody's suggests the Diversity Score as a measure of diversification in the collateral pool. This measure is used in Moody's Binomial Expansion Technique to infer the probability of default and thus the expected Loss in the portfolio. In this paper, we examine the appropriateness of this approach to assess the reality of defaults using a copula approach and lower tail dependence.