Boreiko, D.V.Kaniovski, Y.M.Pflug, G.Ch.2012-04-192012-04-192011-07http://hdl.handle.net/10400.21/1405The 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.engMarkov transition matrixCredit riskCredit events correlationSpreadTrancheRecovery ratePercentileconference object