Based on joint subordination, dependent multi-dimensional compound Poisson processes are constructed. The time-changed processes are used to introduce a new stochastic volatility model for asset price returns and to build multi-dimensional generalizations of popular univariate jump-diffusion models. Moreover, worst-case dependence structures between portfolio values and the default times of the contractual parties to a derivative transaction, which lead to extremal wrong-way risk, are established.
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Based on joint subordination, dependent multi-dimensional compound Poisson processes are constructed. The time-changed processes are used to introduce a new stochastic volatility model for asset price returns and to build multi-dimensional generalizations of popular univariate jump-diffusion models. Moreover, worst-case dependence structures between portfolio values and the default times of the contractual parties to a derivative transaction, which lead to extremal wrong-way risk, are establishe...
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Translated abstract:
Basierend auf gemeinsamer Subordination werden mehrdimensionale zusammengesetzte Poissonprozesse konstruiert um ein neues stochastisches Volatilitätsmodell einzuführen und bekannte eindimensionale Sprung-Diffusions-Modelle mehrdimensional zu erweitern. Zudem werden Worst-Case Abhängigkeitsstrukturen zwischen dem Portfoliowert und den Ausfallszeiten der Vertragspartner einer Derivatetransaktion ermittelt, die zu extremen Wrong-Way-Risk führen.