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Distribution of Defaults in a Credit Basket
Jan 1, 2010
Pete Benson presents an interesting special case of the standard credit portfolio derivatives pricing model. Closed-form solutions are in short supply for these models, particularly for non-trivial values for correlation. Pete noticed this somewhat surprising result in preparing examples of the model. Once he found the proof, Pete proceeded to challenge a number of the research group members with the problem, and the problem has now become a standard interview question here.
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