• Corpus ID: 210430323

Default correlation: empirical evidence

@inproceedings{Servigny2002DefaultCE,
  title={Default correlation: empirical evidence},
  author={Arnaud de Servigny and Olivier Renault},
  year={2002}
}

• Arnaud de Servigny, O. Renault
• Published 2002
• Economics

The aim of this paper is to provide new empirical evidence on default correlation, using Standard & Poor’s rating database, and to benchmark some popular market practices. Some of our findings confirm what previous research had already established; some also clearly tend to challenge several common practices that have limited empirical support. We advocate the use of empirical correlation as a benchmark for current credit portfolio model specifications. We then study the impact of the business cycle and of the horizon on correlation and on the credit value at risk of a portfolio. We also give directions for further quantitative modelling. 1 Standard and Poors, Risk Solutions, 18 Finsbury Circus, London EC2M 7NJ. [e-mail] 2 [e-mail]