Abstract
SYNOPTIC ABSTRACTIn recent years, rapidly growing credit derivative market produces many complex credit derivatives, such as multi-name credit derivatives whose trade is very active and the pricing of which is more complicated than single-name credit derivatives. In this paper, we first construct the hazard rate function considering the practice of discrete credit spread, and derive the joint default distribution by applying copulas to characterize the default correlation; then we use three copula functions, Gaussian, Gumbel and Clayton, to simulate the correlated time to default of obligors, and price a basket default swap and make sensitive analysis under different Kendall tau.
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