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Resumo(s)
The portfolio generating the iTraxx EUR index is modeled by coupled Markov chains. Each of the industries of the portfolio evolves according to its own Markov transition matrix. Using a variant of the method of moments, the model parameters
are estimated from a data set of Standard and Poor's. Swap spreads are evaluated by
Monte-Carlo simulations. Along with an actuarially fair spread, at least squares spread is considered.
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Markov transition matrix Credit risk Credit events correlation Spread Tranche Recovery rate Percentile