hard · FRM Part 2 Market Risk
Under a bivariate Gaussian copula, Kendall's tau relates to the copula's linear correlation parameter ρ via τ = (2)/(π)arcsin(ρ). A risk manager estimates the empirical Kendall's tau between two credit spread indices at τ = 0.50.
To calibrate a Gaussian copula consistent with this rank-dependence estimate, what value of ρ should be used?
- 0.333
- 0.518
- 0.707
- 0.500
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