In this paper, we construct quantitative models in which the dependence structure of the firms’ default times is incorporated. Such models serve as the underlying frameworks in our proposed approach to price and hedge basket credit derivatives. Through the Gaussian copula-based method, we model the default correlation risk and develop valuation formulas for credit derivatives. Using single-name derivatives in a hedging strategy for basket credit derivatives, the utility of the delta and delta-gamma hedging techniques are examined. This enables the management of risk attributed to the changes in correlation without the need for a large number of hedging instruments. Our research contributions provide insights on how dependent risks in basket credit derivatives could be dealt with effectively.

中文翻译：

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一篮子信用衍生产品的相关风险如何定价和管理？

在本文中，我们构建了量化模型，其中纳入了企业违约时间的依赖结构。在我们提出的价格和对冲篮子信用衍生品的拟议方法中，此类模型用作基础框架。通过基于高斯copula的方法，我们对违约相关风险进行建模，并开发信用衍生产品的估值公式。在篮子信用衍生产品的对冲策略中使用单名衍生产品，考察了增量和增量伽玛对冲技术的效用。这样就可以管理归因于相关性变化的风险，而无需使用大量对冲工具。我们的研究成果提供了有关如何有效处理篮子信贷衍生工具中的依存风险的见解。