medium · FRM Part 2 Market Risk
An analyst uses a Gaussian copula to model the joint default of two firms. They observe that as the threshold for default becomes more extreme (lower probability), the conditional probability of one firm defaulting given the other has already defaulted goes to zero.
This is a property known as:
- Zero tail dependence.
- Rank invariance.
- Comonotonicity.
- Asymptotic consistency.
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