Gaussian copula

The standard dependency model in the market is the Gaussian copula model, originally proposed by Li (2000). In this approach, a term structure of survival probabilities is assumed for each asset, which we obtain from the cumulative default probabilities for each asset. Dependency is then introduced via the Gaussian ...

For five years, Li's formula, known as a Gaussian copula function, looked like an unambiguously positive breakthrough, a piece of financial technology that allowed hugely complex risks to be modeled with more ease and accuracy than ever before. With his brilliant spark of mathematical legerdemain, ...

The Gaussian Copula spell wishes away the possibility of a nationwide decline in U.S. home prices (if you haven't already, please read Felix Salmon's 2009 Wired magazine article on the Gaussian Copula - "The Formula That Broke Wall Street" - my ...