What is meant by default correlation?
Answer to relevant QuestionsWhat is the drawback of the default correlation measure and what alternative measure is used in measuring portfolio credit risk? What is a common feature of all structural models? Why might the investment objective of a portfolio manager of a life insurance company be different from that of a mutual fund manager? Explain why in implementing a yield spread strategy it is necessary to keep the dollar duration constant. Suppose that the initial value of an unlevered portfolio of Treasury securities is $200 million and the duration is 7. Suppose further that the manager can borrow $800 million and invest it in the identical Treasury ...
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