The Devil is in the Tails: Actuarial Mathematics and the Subprime Mortgage Crisis

@article{Donnelly2010TheDI,
  title={The Devil is in the Tails: Actuarial Mathematics and the Subprime Mortgage Crisis},
  author={C. Donnelly and P. Embrechts},
  journal={ASTIN Bulletin},
  year={2010},
  volume={40},
  pages={1 - 33}
}
Abstract In the aftermath of the 2007-2008 financial crisis, there has been criticism of mathematics and the mathematical models used by the finance industry. We answer these criticisms through a discussion of some of the actuarial models used in the pricing of credit derivatives. As an example, we focus in particular on the Gaussian copula model and its drawbacks. To put this discussion into its proper context, we give a synopsis of the financial crisis and a brief introduction to some of the… Expand
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