Short Course: Dynamic Copula - Part II: Marking to Market Credit Derivatives on Simultaneous Credit Events

Umberto Cherubini and Sabrina Mulinacci (University of Bologna, Italy) 

Abstract: We review the main applications to finance from the viewpoint of dynamic relationships, and the interaction between temporal and spatial dependence. Concerning pricing, we address the parity relationships needed for applications to equity and credit, and copula dependence applications under the risk neutral measure. We then review the applications to Value-at-Risk in the historical risk measure, both in the spatial setting, linked to the dependence structure among risk factors, and temporal setting, associated to the liquidity issue.