INDEX 367correlation breakdowns 226–40
correlation jumps and volatility
behaviour 228–36
data and descriptive statistics 226–8
impact on portfolio optimization
237, 238, 239
correlation matrix 161, 162–3
correlations
between default events seedefault
events correlations
empirical study of time-varying
return correlations and the efficient
set of portfolios 265–77
model risk and 210
costless contracting 283–4
Courtadon, G. 210
covariance
asymmetric 328–9, 348, 349–50, 351
conditional 342–7
covariance structure of asset returns
and optimal portfolio weights
243–6
monitoring changes in covariance
matrix seesequential control
procedures
Cox model 136–7
Crama, Y. 8
Cramer–von Mises test 6
crash-phobia 196
credit risk valuation 107–31
general model 110–14; basic setting
110–12; stochastic volatility and
Merton’s pricing 112–14
simulation study 118–26; credit
spread 123–6, 127; volatility and
debt 118–23
stochastic volatility model 114–17
credit spreads 123–6, 127
crises 304
Crnkovic, C. 216
Crocket, J. 280
Crosier, R.B. 249
cross-section approach to VaR
backtesting 217–24
applications 219–24
CUSUM control charts 248–50
projected pursuit CUSUM 249–50,
252–3
vector valued CUSUM 249
daily level simulation 165–6
Danilov, D. 103
data verification 208
Day, J. 92
de Haan, L. 7
De Jong, F. 103
debt, volatility and 118–23
debt financing 285
debt pricing seecredit risk valuation
decrease in slope of yield curve
(flattening) 79–81
default events correlations 134, 136,
138–9, 150–1
and default probabilities in
intensity-based models 139–41
large time horizons 139, 152–4
default probabilities
intensity-based models 137; and
default events correlations
139–41
Merton-style models 133, 134
default risk 108
deflation protection 178–81
Delbaen, F. 22, 24–5, 27, 28
Delianedis, G. 108
dependence levels 132–55
comparison between dependence
indicators 139–43
extensions of basic intensity-based
model 143–50
intensity-based models 136–9
Merton-style models 133–6
derivatives 26, 34, 35, 159
evolution of pricing models 194–5
model risk and 191–212
model selection and its impact on
hedging 353–64
role of models for 197–9
see also under individual types of
derivative
Derman, E. 192, 354
deterministic (local volatility) models
354
Di Graziano, G. 357, 358, 360
Diebold, F.X. 103, 115, 216, 246
differential importance measure 49,
50–1, 65–6
trading strategies and 58–65
DIPO 8
discount bonds price 70–2
discount rates 286–7, 288, 290–3,
293–4
diversification-based risk measure
22–46
economic motivation 29–30
implementation 33–7
numerical example 31–3
pricing portfolio insurance 37–43